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Elder Law in Valley Stream, NY: Review Your Trust

In general, a trust is a legal instrument by which an individual gives control over his/her assets to another (the trustee) to disburse according to the instructions of the individual creating the trust. There are a number of different types of trusts, including Revocable Trusts and Irrevocable Trusts

Treatment of Revocable Trusts

In the case of revocable trusts established by a potential Medicaid applicant, the entire value of the trust is considered an available resource (asset) which could make the Medicaid applicant ineligible. All payments made from the trust to or for the benefit of the Medicaid applicant are considered available income in the month received. Further, all payments made from the trust to a person other than the Medicaid applicant are considered to be assets transferred for less than fair market value for purposes of the transfer of assets rule (i.e., the 5 year look back rule).

Treatment of Irrevocable Trusts

In the case of an irrevocable trust established by a potential Medicaid applicant, any portion of the trust principal, and income generated by the trust principal, from which no payments may be made to or for the benefit of a potential Medicaid applicant is considered to be an asset transferred for less than fair market value for purposes of the transfer of assets rule. Payments made from the trust to or for the benefit of the Medicaid applicant shall be considered available income in the month received.

Any portion of the principal of the trust, or the income generated from the trust, which can be paid to or for the benefit of the Medicaid applicant, is considered an available resource. If the language of the trust specifies that money can be made available for a specific event, that amount shall be considered an available resource, whether or not that event has occurred.

Payments which are made from trust assets considered available to the Medicaid applicant, as described above, and which are not made to or for the benefit of the Medicaid applicant, are considered to be assets transferred for less than fair market value for purposes of the transfer of assets rule.

In the case of trusts, the date on which the 5 year look back penalty begins is the first day of the month following the month in which the trust was funded (or a revocable trust made irrevocable), or assets were transferred for less than fair market value.

If you created a trust and want to review the terms and operation of the trust, or want to discuss the creation of a trust for planning purposes call to schedule a free consultation.

Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and Valley Stream, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.

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