An Irrevocable Trust is a legal document created by a person to benefit their heirs in the event of their death. The assets in the trust are retitled to the name of the trust. This is known as “funding the Irrevocable” and includes anything from a checking account to the title of one’s home. An Irrevocable Trust will not qualify for Medicaid benefits if the assets are not retitled to the name of the trust itself. This is because Individual Retirement Accounts are already protected by law.
When you place assets in an Irrevocable Trust, you give up the right to control the funds and assets. Once they’re in the trust, you can’t access them. Moreover, your assets are no longer counted towards Medicaid eligibility. Your assets have to have been in the trust for at least five years. When applying for Medicaid, you must disclose whether you have made any transfers or received cash from these accounts in the last five years. If you make the transfer before the five-year mark, there may be a penalty period.
When planning for Medicaid, you may want to protect certain assets. If you have real estate, consider placing it in an irrevocable trust. You can transfer these assets to the trust without the risk of disqualification from government benefits. If you have investments in the trust, this means that you can leave them to the trust. You can also use the trust as an asset transfer vehicle if you choose. In the end, you can use your Irrevocable Will to designate the beneficiaries.
Another benefit of an Irrevocable Trust is that it doesn’t limit the Grantor’s control over the assets in the trust. This means that the Grantor can continue to receive income from the trust’s assets, while the beneficiaries won’t receive Medicaid payments. It also helps the trustor keep his or her own assets and retain a percentage of them for themselves. This way, if the Grantor dies, the money will be passed on without probate.
An Irrevocable Trust is useful for Medicaid Planning. When the Grantor places their assets in an Irrevocable Trust, he or she is triggering a 5-year lookback period and is eligible for Medicaid after that. Because of this, the grantor can apply for Medicaid after the lookback period is over and the assets in an Irrevocable Trust do not count against the Grantor’s assets in the estate.
Creating an irrevocable trust can allow the grantor to control his or her assets. The grantor can set a limit on the amount of the trust’s principal, but the principal cannot be touched. Likewise, the grantor cannot access the principal of an irrevocable trust. This means the trust is not considered a resource for Medicaid purposes. A person who creates an Irrevocable will not be tempted to use the property.