IRREVOCABLE TRUST IRREVOCABLE TRUST For Medicaid EligibilityFor Medicaid Eligibility

Boston Elder Law AttorneysBoston Elder Law AttorneysSpecializing in Medicaid PlanningSpecializing in Medicaid Planning

Cohen & Oalican, LLCCohen & Oalican, LLC

617-263-1035- Boston617-263-1035- Boston508-821-5599 – Raynham508-821-5599 – Raynham978-749-0008 - Andover978-749-0008 - Andover

Irrevocable Trust, PreambleIrrevocable Trust, Preamble

Your irrevocable trust will protect the trust assets Your irrevocable trust will protect the trust assets should you or your spouse ever apply for MassHealth should you or your spouse ever apply for MassHealth nursing home benefits. nursing home benefits.

MassHealth will only consider the trust assets to be MassHealth will only consider the trust assets to be “non-countable” if your access and rights to the trust “non-countable” if your access and rights to the trust property are limited. property are limited.

Please review this presentation carefully so that you Please review this presentation carefully so that you and the trustee understand how the trust will work and the trustee understand how the trust will work and your obligations and rights to the trust property. and your obligations and rights to the trust property.

IrrevocableIrrevocable The trust is irrevocable, meaning that you cannot change it. The trust is irrevocable, meaning that you cannot change it. You have no right to demand that the trust assets be returned You have no right to demand that the trust assets be returned

to you. to you. The trust does, however, contain language which allows you to The trust does, however, contain language which allows you to

appoint a new trustee. appoint a new trustee. The trust also gives you a power of appointment. This means The trust also gives you a power of appointment. This means

that you can change the interests of the beneficiaries upon that you can change the interests of the beneficiaries upon your death by changing your will.your death by changing your will.

Once you place an asset into your irrevocable trust you no Once you place an asset into your irrevocable trust you no longer own it, the trust does. longer own it, the trust does.

However, you can still benefit from the trust asset in many However, you can still benefit from the trust asset in many ways. ways.

Principal and IncomePrincipal and Income By the terms of the trust, none of the trust principal can be paid to you By the terms of the trust, none of the trust principal can be paid to you

under any circumstances. under any circumstances. This is critical in order to make sure that the trust assets are protected from This is critical in order to make sure that the trust assets are protected from

MassHealth. MassHealth. Think of your trust like a locked safe. Think of your trust like a locked safe. Although assets placed into the trust must remain in the trust, they can be Although assets placed into the trust must remain in the trust, they can be

sold. sold. For example, if real estate is placed in the trust and it is subsequently sold, For example, if real estate is placed in the trust and it is subsequently sold,

the proceeds from the sale must remain in the trust. the proceeds from the sale must remain in the trust. Likewise, the trustee could be use the proceeds to purchase a new home for Likewise, the trustee could be use the proceeds to purchase a new home for

you. However the new home would be titled in the name of the trust. you. However the new home would be titled in the name of the trust. You also have a continuing right to live in real estate owned by the trust. You also have a continuing right to live in real estate owned by the trust. Additionally, the interest and dividends earned on the trust property or Additionally, the interest and dividends earned on the trust property or

rental income can be paid out to you. rental income can be paid out to you. Because you no longer own the property held in the trust, you will most Because you no longer own the property held in the trust, you will most

likely not be able to mortgage or take out an equity loan on the property. likely not be able to mortgage or take out an equity loan on the property.

Medicaid EligibilityMedicaid Eligibility By transferring assets into this trust, you have made yourself By transferring assets into this trust, you have made yourself

and your spouse ineligible for MassHealth for the next five and your spouse ineligible for MassHealth for the next five years. years.

It is critical that you not file a MassHealth application until the It is critical that you not file a MassHealth application until the five-year “lookback period” has passed. five-year “lookback period” has passed.

If you apply too soon, you may make yourself and your spouse If you apply too soon, you may make yourself and your spouse ineligible for MassHealth benefits for a period exceeding five ineligible for MassHealth benefits for a period exceeding five years. years.

Should you or your spouse require nursing home care within Should you or your spouse require nursing home care within the next five years, you should contact our the next five years, you should contact our Boston Attorney office Boston Attorney office Specializing in Specializing in Medicaid Planning Medicaid Planning and and Irrevocable Trusts Irrevocable Trusts so we can advise you how best to proceed so we can advise you how best to proceed

TaxesTaxes The trust is written so that if your home or other appreciated The trust is written so that if your home or other appreciated

assets are sold after your death, you heirs will receive what is assets are sold after your death, you heirs will receive what is called a “step-up” in the tax basis. called a “step-up” in the tax basis.

This means that the ultimate beneficiaries of the trust will pay This means that the ultimate beneficiaries of the trust will pay little or no capital gains taxes if they decide to sell property little or no capital gains taxes if they decide to sell property after your death. after your death.

If your primary residence is owned by the trust and it is sold If your primary residence is owned by the trust and it is sold while you are alive, you will be able to utilize your $250,000, while you are alive, you will be able to utilize your $250,000, or $500,000 in the case of couples, capital gains exclusion. or $500,000 in the case of couples, capital gains exclusion.

The trust property will be included in your taxable estate. The trust property will be included in your taxable estate. A Massachusetts estate tax will only be owed upon the A Massachusetts estate tax will only be owed upon the

surviving spouse’s death if your total estate (including the surviving spouse’s death if your total estate (including the trust assets) exceed $1 million. trust assets) exceed $1 million.

Taxes, con’tTaxes, con’t If you have only placed real estate into your irrevocable trust, you can If you have only placed real estate into your irrevocable trust, you can

continue to file your annual income taxes as you have in the past. continue to file your annual income taxes as you have in the past. Accordingly, you will not need a new tax identification number for the Accordingly, you will not need a new tax identification number for the

trust. trust. Further, you will still be able to claim any deductions related to your home Further, you will still be able to claim any deductions related to your home

on your taxes. on your taxes. If you have placed liquid assets into your trust, you will need to apply for a If you have placed liquid assets into your trust, you will need to apply for a

new tax identification number (EIN) and file an annual trust tax return. new tax identification number (EIN) and file an annual trust tax return. The trust is drafted so that all the income earned on the trust assets will be The trust is drafted so that all the income earned on the trust assets will be

taxable to you. taxable to you. You should contact your accountant who will need to complete the You should contact your accountant who will need to complete the

necessary tax forms for the trust.necessary tax forms for the trust.

ProbateProbate

Any property held in the trust will avoid the Any property held in the trust will avoid the probate process and pass directly to the probate process and pass directly to the beneficiaries named in your trust. beneficiaries named in your trust.

Should you ever wish to change the Should you ever wish to change the beneficiaries of the trust, please contact our beneficiaries of the trust, please contact our Boston Medicaid Planning Attorney’s so we Boston Medicaid Planning Attorney’s so we can assist you further.can assist you further.

Other ImplicationsOther Implications Placing your home into an irrevocable trust may cause you to Placing your home into an irrevocable trust may cause you to

lose any tax abatements you may currently receive. lose any tax abatements you may currently receive. If you have recorded a homestead on your primary residence If you have recorded a homestead on your primary residence

and then subsequently transfer your home into the trust, you and then subsequently transfer your home into the trust, you may lose the protection afforded by the homestead. may lose the protection afforded by the homestead.

If you currently have a mortgage on your property, it may If you currently have a mortgage on your property, it may technically become due upon transferring the property into an technically become due upon transferring the property into an irrevocable trust. irrevocable trust.

Our Boston Elder Law Attorneys recommend that you inform Our Boston Elder Law Attorneys recommend that you inform your insurance company that your trust is the owner of your your insurance company that your trust is the owner of your home. home.

Your insurance company should change the home owner’s Your insurance company should change the home owner’s policy to reflect that the trust is the new owner. policy to reflect that the trust is the new owner.

Boston Elder Law AttorneysBoston Elder Law AttorneysSpecializing in Medicaid PlanningSpecializing in Medicaid Planning

Cohen & Oalican, LLCCohen & Oalican, LLC

617-263-1035- Boston617-263-1035- Boston508-821-5599 – Raynham508-821-5599 – Raynham978-749-0008 - Andover978-749-0008 - Andover