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April 5, 2020

Are Assets in a Trust Protected from Medicaid?

Medicaid has strict qualification requirements, which means you need to plan ahead and protect yourself from losing out on this healthcare option. You

can protect assets from Medicaid in a trust, but only if you select the right type of trust.

What Is a Medicaid Trust and How Does It Protect Your Assets?

A Medicaid trust is an irrevocable trust. You place your assets into the trust to protect them from future nursing home care costs. You must have the documents drafted correctly, including making a trustee that is a relative, child, or another third party other than yourself.

These trusts are then exempt from the rules for Medicaid eligibility. This means that, because the trust now owns the assets and you are not a beneficiary of that trust, the assets are exempt from seizure.

You Must Transfer Five Years in Advance

The reason you should start your Medicaid planning now is that you have a small window where you can set up the trust, fund it, and transfer ownership of all assets. You must transfer those assets within five years prior to applying for Medicaid or entering a nursing home. Medicaid will do a five-year lookback period, and if you transfer any assets within that five years, they are not exempt.

So, even if you plan to retire in ten years, now is the time to set up that Medicaid trust so that you have a five-year window where no assets were moved from you to the trust.

Can’t You Just Give Your Assets to Family Members Instead?

Sometimes, people will try to skip the trust process and transfer ownership of assets over to loved ones instead. Giving to a family member not only puts them at risk for taxes, but those assets could be lost forever, depending on how the family member manages those assets. For example, you transfer your personal property over to a child. Now, the child’s name is on the title of that property, but you have only transferred it there to avoid losing it when you sign up for Medicaid.

Because your child’s name is on the title, any debts or legal actions taken against them can cost that asset. For example, your child is sued for unpaid debts and the courts allow seizure and sale of the home you titled to them. While your loved one was keeping that asset safe, it is subject to their personal losses. Even a divorce may require that your loved one must sell the home and split the proceeds with an ex-spouse – leaving you with no assets.

Bottom line, transferring these assets over to a family member puts them at risk. When you place them in a trust, even if loved ones are the beneficiaries, those assets cannot be seized or confiscated.

How Does a Medicaid Trust Work?

With a Medicaid trust, you will hire an experienced attorney to create the trust first. Then, your attorney can help you transfer assets in your name into the trust – basically making the trust the owner of those assets.

Once your assets are in the Medicaid trust, the government no longer considers them your assets. That means you can still use those assets, including living in your home that is owned by the trust, but that home and the value of the home will no longer be considered part of your estate.

Upon your death, the assets in the trust would then be passed down to beneficiaries you named at the time you created it. Often, these are children, charities, or other relatives.

Will Medicaid Cover Long-Term Care?

Medicaid does cover medical care, including long-term medical care and hospitalizations.

However, to unlock this coverage, you must meet strict requirements, including:

  • Be at least 65 years old or have a diagnosis of a permanent disability under SSA
  • Be diagnosed blind

On top of those primary requirements, you then must meet the financial eligibility, which is where your Medicaid trust comes into play.

Here are the financial requirements for Medicaid’s long-term care coverage:

  • You must meet a strict monthly income limit. Medicaid sets a hard limit, regardless of where you live, which is $2,313 per month. Exceptions are made for seniors who have serious medical conditions and their medical costs are much higher, even when their income is above this limit.
  • You must have limited assets available. Exempt assets include your primary home and personal belongings, and you can also keep one vehicle. You may be able to keep your life insurance, but only if it is valued under $1,500 – which is rare for any life insurance policy. Any assets outside of the exempt list are subject to Medicaid consideration. The reason being, Medicaid assumes you can sell those assets and use the proceeds for your care, even though it does not always work that way.

Considering a Medicaid Trust? You Still Need an Attorney

While you have learned the basics of a Medicaid trust and how it may protect your assets and allow you to unlock long-term care, you still need to hire an attorney.

An attorney will evaluate your current assets and see if a Medicaid trust is the right choice for you. Furthermore, setting up an irrevocable trust is a complex procedure that requires professional assistance. You need an attorney to not only draft the initial documents, but make sure all assets subject to Medicaid requirements are protected by that trust.

Sometimes, a trust is not the right answer when evaluating your options for long term care. Meeting with an attorney allows you to explore all options outside of a Medicaid trust to make sure you are choosing the right path to protect your assets.

If you are ready to explore your options for long term care or you would like to see if a Medicaid trust is the best option for you, schedule a free case evaluation today with Andrew M. Lamkin, PC. For your free consultation, call us directly or request more information online.

What Are the Powers and Duties of a Trustee?

A trustee is a party who has a fiduciary obligation to any property held by the trust. While the trust holds the legal title to all property and assets within it, the trustee is responsible for following the instructions left in the trust documents, including ensuring the best interests of the beneficiaries are considered.

The role of the trustee is a complex one – and one that comes with numerous responsibilities. Trustees have a duty to serve the trust and the trust’s beneficiaries, and failure to do so could result in potential liability lawsuits.

It is important to understand the role, powers, and duties of a trustee whether you are considering serving as one or you are appointing one for your trust.

Exploring the Primary Role of the Trustee

A trustee takes on numerous tasks, and once named, they will be in charge of the trust’s assets and ensure that beneficiaries receive their inheritances. Due to the delicate nature of this position, you should be cautious if you are taking on the role or appointing someone. Before picking a trustee, it is important to understand the role of the trustee and the character of the person who fills that role.

There are three primary tasks that a trustee will do, including:

  1. Making all investment decisions on behalf of the trust using trust assets;
  2. Distributing assets from the trust to beneficiaries; and
  3. Handling all administrative duties while administering the trust.

As you can see, the list of primary duties within this role are not something you should give to just anyone. The party named as the trustee will have full control over the trust and all associated assets. That kind of power requires a person with good judgment, intelligence, and trustworthiness.

What Are the Duties of a Trustee?

Once you appoint a trustee, their primary duty is to serve the needs of the trust beneficiaries. Some essential duties can include:

  • Remaining impartial while administering the trust. A person cannot let their emotions affect their judgment in this position. The trustee must remain impartial while administering the trust. Even if they dislike a beneficiary, they must follow all trust rules and guidelines while administering the trust. This means putting all feelings, beliefs, and emotions to the side while they fulfill their duties.
  • Being prudent and acting as quickly as possible. A trustee cannot purposely delay administering the trust. They must perform their duties within a reasonable amount of time, including any distributions that are on a specific schedule. Likewise, they must be prudent with their investment decisions to ensure that the trust assets are protected and invested wisely.
  • Preserving and protecting trust assets until the trust is distributed. Until the trust is fully distributed, it is the duty of the trustee to preserve and protect any assets held by the trust.
  • Reporting and keeping accurate records. Another duty of the trustee is to keep records of all trust activities. This includes recording any investments or distributions, and depending on the trust document, the trustee may be required to provide activity reports to all named beneficiaries every so often. A beneficiary also has the right to request an activity report, and the trustee must supply that report to the beneficiary within a reasonable amount of time.
  • Maintaining the productivity of the trust. A trust is meant to grow and stay productive. Therefore, the trustee has a duty to invest assets and make them grow or work for the trust to benefit the beneficiaries later on. They must make sound investment decisions, manage all existing investments, and make changes as necessary to keep the trust productive. If a trustee were to allow assets to sit without any investments, the trust would not be productive.
  • Following all investment expectations. While a trustee is expected to keep the trust productive, their investment decisions are based on numerous factors. The trustee must consider the current economic conditions and any possible inflation or deflation effects on every investment decision they make. They also must consider any tax consequences, when applicable. Likewise, before investing trust assets, a trustee must consider the return on the investment before doing so. Lastly, the trustee must make sure that all needs for liquidity are addressed as well so that the trust has liquid assets when needed.

What Powers Does a Trustee Hold?

A trustee has considerable power over the trust assets. The trustee may take actions on behalf of the trust. That means they have the power to invest and remove investments as they see fit. They still must abide by any state laws or relevant common laws while handling assets in that trust.

A trustee’s power also relates to their authority over three primary areas. These three areas include administration, investment, and distribution. The trustee has the power to influence all of these areas. If a trustee makes a poor investment decision, for example, it will directly impact the payout and distribution area of their role.

Choosing a Trustee Wisely

Understanding the role, powers within the role, and duties of the trustee can help you better decide who to name for this very critical role. It can also help if you are considering taking the position of a trustee. In some cases, a trust requires daily interaction and work and it can be very time consuming for the party in the role.

You want a person who is diligent and trustworthy, especially when you consider all of the power they hold over a family’s legacy.

Create Your Trust Documents with a Local Estate Planning Firm

If you are ready to create a trust for your family and protect your assets, you will want to speak with a local estate planning law firm. An attorney will review your current assets and help you determine whether or not a trust is right for you.

While creating the trust, your attorney will also draft the related trust documents that help protect beneficiaries from abuse by the trustee. Your attorney can also advise you on picking the most suitable candidate for your trustee position.

To get started, contact the Law Office of Andrew M. Lamkin, P.C., today. We offer free, no-obligation consultations, and we can discuss your options for a trust as well as help you begin creating a trust when you are ready.

Can I Leave Property in a Trust for My Grandchildren?

As a grandparent, you want to secure a healthy financial future for your grandchildren.

One of the better ways to do that is through a trust. Trusts, in general, are excellent ways to pass assets to beneficiaries, and they can also help your grandchildren achieve their goals later in life.

If you are considering leaving property or some of your assets to your grandchildren, but you do not want to gift them outright, discuss your options for setting up a trust with attorney, Andrew M. Lamkin, today.

Why Plainview Residents Use a Trust for Grandchildren 

Putting money, property, and assets into a trust for your grandchildren allows you to:

  • Create Rules for Their Inheritance: You are in control of their inheritance. That means you can put guidelines on how they can use their inheritance and even when they will receive it.
  • Use Milestones for Releases: You can set up milestones over your grandchild’s lifespan so that they do not receive all of their inheritance at once.
  • Protect Property from Dangers: You have no way to tell what your grandchildren’s life will be like as they get older. But by adding protections through a trust, you can ensure that their inheritance is not harmed from things like debt collectors, divorce, or even substance abuse issues.
  • Help Them Meet Their Goals: You can help your grandchildren go to school, get a master’s degree, or even buy their first home. If you have a grandchild that plans to open his or her own business someday, the property you leave them may help them reach that goal.

What about Estate Taxes?

Trusts may be subjected to Generation Skipping Tax (GST) when established for grandchildren. Under the 2018 Tax Cuts and Jobs Act, however, the GST exemption was added as a second layer exemption. Right now, the GST exemption is the same as the regular estate tax. Therefore, as of 2018, you can leave up to $11.2 million in property to each grandchild without them paying an estate tax. After $11.2 million, they would have to pay.

Establishing a Trust for Your Grandchildren – Where Do You Start?

Trusts are relatively quick and straightforward to set up. But if you have multiple grandchildren or you plan to leave inheritances to your grown children, too, the process becomes more complicated. Also, you want to ensure you set up your trust correctly, especially if your grandchildren are still considered legal minors.

In most cases, you will establish an irrevocable trust. This means, once the trust is established, you cannot change it or reclaim property within it.

Select a Trustee with Care

Be cautious about whom you pick as a trustee. Your trustee approves any distributions from the trust and manages trust funds. You can choose a family member for this position, or you have the option of a neutral third-party. If you are worried that family emotions may affect how the trust is managed, a third party with no ties to your trust could be the better option for ensuring your wishes are met and assets are distributed in accordance to your instructions.

Choose the Right Type of Trust

Once you decide that you want to establish a trust for your grandchildren, the next step is to choose between the two primary types:

  1. Family Pot Trust: A family pot trust is ideal if you have a large family and a trustworthy trustee that you can ensure will distribute assets properly. With this option, you have one trust and the trustee decides how much or when to distribute property to grandchildren and other beneficiaries. Pot trusts allow you to leave a financial legacy that will provide for future generations, too.
  2. Individual Trust for Each Grandchild: If you do not like the idea of a pot trust, or you worry that your grandchildren may not receive the distributions you intended, then an individual trust in their name for the handful of grandchildren may be better. You can put equal amounts of money or property into each grandchild’s trust as well.

Be Specific and Leave Stipulations

Trusts are meant to ensure your loved ones are provided for and that they received assets when you want them to receive them. You can work alongside your trust attorney to make sure the language is specific and suits your needs. Stipulations will influence not only when and how much grandchildren receive of their trust funds, but also how they can use the funds.

Often, grandparents will set up key life milestones, such as distributions at 20, 25, 30, and 35. You can also leave instructions to a trustee regarding early distributions for purchasing a house or paying for college tuition.

Discuss the Trust with Family First

If you plan to leave funds to grandchildren, have a family meeting and make sure everyone understands where they stand and how you plan to distribute your wealth. If your grandchildren are minors, explain how the trust works to their parents. Also, make sure the trustee is present at your family meeting to answer questions and make sure everyone is on the same page.

Find a Trust Attorney in Your Area Today

If you are ready to leave a financial legacy to your grandchildren, speak with the Law Office of Andrew M. Lamkin, P.C., to establish your individual or generation-skipping trust for your family today.

We will go over your options, discuss what is beneficial considering your grandchildren’s ages and needs, then get the process started so that you can transfer property into the trust and officially fund it.

We work hard to ensure all trust documents follow state laws, and we help our clients provide for their loved ones years after they have passed.

Your legacy is important to you, and you want to see it live on through your grandchildren. Let our law firm help make that possible.

Schedule a free consultation with our firm today regarding a trust for your grandchildren. We offer free consultations at 516-605-0625, or you can request more information online.

What Assets Should You Put in a Trust?

Not sure which assets you should transfer into a trust? There are some you can transfer (and should), while others could cost you when it comes to taxes and penalties.

Creating a trust is only half the battle. The most critical step to establishing a revocable trust is to fund that trust. Funding, in its simplest terms, means transferring assets from your name into the name of the trust – making the trust the owner of that asset.

A revocable living trust is the trust of choice for many families today. They break away from reliance on a will or joint ownership and save loved ones the cost and time of probate court. Furthermore, they allow beneficiaries to receive their inheritance faster.

Assets You Can and Cannot Put into Your Plainview, NY, Trust

Funding is a critical step to finalizing your trust. Once your assets are put into the trust, you are the trustee, and you control those assets. As the trustee, you buy and sell assets associated with the trust, and you do not need court approval.

The funding process sounds daunting, but it is not. One thing funding does require is time. You will need to fill out the documents allowing you to transfer ownership, and an estate planning attorney can help if you do not wish to do so yourself.

Not all assets can transfer into a revocable trust. Therefore, you need to understand what assets you can and cannot transfer, and ones that you should prioritize in case you are unable to move all of the assets in time.

Types of Assets You Cannot Put in a Revocable Trust

As stated before, not all assets can go into a trust. These assets are those that cannot be retitled, but you can still designate a beneficiary for them.

  • Retirement Accounts – Your retirement account is yours, and you have funded it. But you cannot place it into your trust. Any retirement account, including a 401(k), IRA, and annuities should never be put into a trust. If you do, then the transfer of those assets will count as a withdrawal and 100 percent of the value is subject to income tax. To avoid such tax, name the trust as the beneficiary on your beneficiary designation.
  • Health Savings Accounts or Medical Savings Accounts – If you contribute to an HSA, you may be unable to retitle that account. If you cannot, you can again name the trust as the primary or secondary beneficiary.
  • Life Insurance Policies – Life insurance policies can be transferred into a trust, but ask your attorney before doing so. Sometimes it is better to use the trust as the primary or secondary beneficiary.

Types of Assets You Can and Should Put in a Revocable Trust

Other assets can and should be placed in your trust. These assets are quickly passed to your loved ones, and they avoid going through probate – a lengthy and costly process.

All these accounts should be your top priority. Because without them being in a trust, they could be subject to creditors. Many of these accounts will hold high value and may contain inheritances your beneficiaries need immediately. If they are subject to probate, then your family will need to wait for the probate process to complete itself.

  • Cash Accounts – Cash accounts, including savings and checking accounts, money markets, and CDs should be placed into a trust. Check with your bank before transferring a CD. Some financial institutions consider a CD transfer a withdrawal, which means you could be penalized. If that is the case, name the trust as the primary or secondary beneficiary instead.
  • Investment and Brokerage Accounts – Any investment account you have, including brokerage accounts in your name or joint accounts, should be transferred into your trust.
  • Annuities – A non-qualified annuity can be transferred into the name of your Revocable Living Trust, and you can also name the trust as your primary or secondary beneficiary if you prefer.
  • Stocks and Bonds – If you have stocks or bonds in certificate form, you can return those certificates to the transfer agent and receive a new certificate with the trust named as the owner. If you want to avoid the hassles of transfer, you can also deposit the certificates into a brokerage account and then transfer them that way.
  • Personal Property – Tangible assets like jewelry, books, papers, household goods, and other personal property can be put into the trust.
  • Businesses – If you have business interests such as stocks in a public corporation, you can transfer those into the estate. However, you must read all shareholder agreements to ensure you are complying. Also, review any partnership agreements and operating agreements to ensure you follow the rules of transfer.
  • Unsecured Personal Loans – Any money owed to you may be transferred into the trust. If you have an unsecured personal loan out, the proceeds of that loan repayment can go directly into the trust.
  • Royalties, Trademarks, Patents, and Copyrights – You will need to go through the federal guidelines to transfer any royalties from patents and copyrights into your trust.
  • Oil, Mineral, or Gas Rights – If you have ownership of these rights, you may be able to transfer them or assign a new deed with the name of the trust listed.
  • Real Estate – Any real estate you own can be transferred into the living trust. You will need to have a new deed recorded where the real estate is located. Therefore, if you have a vacation property, you must receive a deed in that vacation property’s city or state.

Concerned about Your Assets? Talk to an Estate Planning Attorney First

Identifying which assets you can and should transfer versus those you cannot requires an understanding of estate planning laws here in New York.

Instead of trying to decode the law, speak with an estate planning attorney who can help you identify the assets best suited for your estate plan and those where you would name the trust as the beneficiary instead of transferring.

Contact the Law Office of Andrew M. Lamkin, P.C. to explore your options at 516-605-0625 or request a free consultation online.

5 Trust Types That Will Maximize Your Kids’ Inheritance

One of the most important parts of an effective estate plan is to ensure that a family’s children are properly provided for, whether they are minors or adults. This is often accomplished by placing some or all of the estate into a trust. The following five types of trusts have been found to be very effective in providing for the care and prosperity of a family’s children. In addition to the specific type of trust, many trusts can be written as revocable or irrecoverable trusts, depending on the specific needs of the family.

Irrevocable Trusts

An irrevocable trust is a trust where the property is placed beyond the control of the parents, subject to the terms of the trust. This has a variety of advantages, including reduced taxation and the fact that the trust’s assets are largely immune from the actions of creditors.

Revocable Trusts

A revocable trust is a trust that can be changed at the option of the grantor. These types of trusts are often used where changing family and personal circumstances may require modifying the trust over the course of the grantor’s lifetime. However, revocable trusts are somewhat more vulnerable to creditors and court actions than irrevocable trusts, and they do not share the same tax benefits.

The 5 Best Trusts For Transferring Money To Your Kids

Section 2503(b) trust is an irrevocable trust that takes the assets and holds them for the child, with the provision that the child must have the income of the trust distrusted to him or her at least once a year. The creator of the trust can determine whether the trust will terminate upon the child’s 21st birthday. This trust can effectively shield the child’s inheritance from creditors, as well as provide the parents with some control over how the child will spend the trust, even after his or her 21st birthday.
Section 2503(c) trust is similar, but automatically terminates upon the child’s 21st birthday. In addition, the trustee can use the money in the trust to pay for the child’s college education. This trust is a tool commonly used to protect the estates assets until the children are adults and capable of effectively managing the funds released into their care.

spendthrift trust is a special type of trust that can be especially useful if a parent has doubts about their child’s ability to manage his or her funds effectively. This trust allows the trustee to refuse to release funds if he or she believes that they will be taken by a creditor or otherwise misused by the beneficiary. This trust can protect the child from being rendered penniless due to a lawsuit or other civic debt.

special needs trust is a type of trust designed to allow an individual to be able to make use of the trust without rendering them ineligible for government aid. This type of trust can be useful for families who have disabled children, as it allows the child to avoid having to choose between their inheritance and the continuation of their government support. A special needs trust can also be used to shield an award from a personal injury lawsuit from government aid income restriction guidelines.

grantor retained income trust is a common tool used to reduce the potential tax liability of the parent’s estate. This trust allows the property to be placed in the trust, but mandates that the grantor will retain the property’s income for a time determined by the grantor. This helps reduce the property’s federal estate tax value, which can dramatically reduce the taxes the grantor’s children will be liable for.

These five types of trusts all provide extremely useful estate planning tools to help ensure that a family’s children, whether they are adults or minors, can enjoy the property that their parents wish to bequeath them.