Funding An Irrevocable Trust Sooner Than Later

An asset is owned by a trust once it is transferred into the trust that was created. This is known as funding the trust. The transfer of assets into a trust can occur in a number of ways depending on the type of asset. For Medicaid purposes the five-year look back period begins one month after an asset is placed in the trust. This means that if a property deed is transferred into the trust in December, the five-year look back period begins in January and ends five years from that date. Every time a new asset is placed in the trust a new five-year look back period will begin for that specific asset, not for all the assets in the trust.

Below are some types of assets that may be placed into an irrevocable trust in order to fund the trust:

  • Money from a savings account may be placed into a trust. However, the trustee must then “open” the trust account. When the trust account is “open” a trustee is able to remove money from the savings account and put it into a Trust account.
  • Life Insurance policies may be placed into a trust. When a policy of this nature is placed into a trust an individual is essentially requesting a change of ownership and beneficiary. The trust will now be named as the policy owner and beneficiary.
  • Real property may also be placed in a trust. The transfer of real property or a deed into a trust shall be prepared and executed by an experienced attorney. This will essentially transfer a property deed from an individuals name into the name of the trust.
  • Brokerage accounts can be placed in a trust. However, like money from a savings account, a trustee must open a brokerage account in the name of the trust. Once the account is opened in the name of the trust, the funds may be transferred from the original brokerage account into the new brokerage account of the trust.
  • Automobiles are often transferred to a trust. However, the Department of Motor vehicle (DMV) must be contracted in order to change the Title to the name of the trust.

It is imperative that a trust be funded in a timely and correct manner in order to overcome the five-year look back period. This will ensure that an individual remains eligible for Medicaid benefits. It is worth noting that retirement funds such as 401K’s, IRA’s, and 403B’s are not usually placed in a trust due to unfavorable tax penalties.

It is important to consult a trusted advisor when funding a trust in order to ensure Medicaid eligibility for the future. An experienced Medicaid planning attorney can assist you in planning ahead for Medicaid and advise you how best to protect and distribute your assets. The attorneys at Hunziker, Jones, and Sweeney P.A. can explain the intricate Medicaid eligibility rules to you, help you decide if the program is right for you, and assist you with formulating a plan to divest yourself of assets. For more information or to schedule a consultation, call our New Jersey Medicaid planning law firm at (973) 256-0456 or fill out our contact form.

Leave a Reply

Your email address will not be published. Required fields are marked *