Listen to Lawrence…Should I put bonds into my Irrevocable Trust?

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CLIENT QUESTION:
I am in the same situation. Davidow drew up an Irrevocable Trust for me 14 years ago. Almost everything I own is in the trust. My only income is my SS check which is $2282 per month. However, I also have some bonds under my name & my daughters’ name.  Should I put them into the trust? Or can I gift them somehow? Or should I have them reissued by the US Treasury into my two daughters’ names & remove my name? Also, with my income am I eligible for Medicaid NOW?
MY RESPONSE:
Congratulations on getting most of your assets into the irrevocable Medicaid trust more than 5 years ago. All the assets in that trust are now fully protected. Most clients are very reluctant to (and probably should not) put ALL of their assets in a trust because the prime goal is not to save every penny for the kids, but rather to balance saving assets for them while protecting your independence and dignity, by leaving certain assets in your name for your own sake.
As we get older, however, you may change your mind about how much money you really need in your name or over the years you simply accumulate more money. Years later you find yourself in the position of wanting to save more money for your kids. So the inevitable question then becomes whether or not you should add more assets to your trust?
The answer is generally NO! Technically you can, but you will then have a new five-year look-back for these new assets placed into the trust. If you do not make it through this new five-year look-back, we often will want to return the gift to you, eliminating the five-year look-back. This is problematic with an irrevocable trust, because such return of these newer transfers may jeopardize the protection of the other assets placed into the trust more than 5 years ago. In such cases, then, we look to other solutions, such as creating a second trust or simply transferring the assets directly to the children. The right solution will differ from client to client. On the other hand, if you are young and healthy enough, you can take the risk that you will remain healthy for 5 more years, and thus placing more assets in your current trust would be acceptable. How risk-averse are you?
If you wish to protect your bonds, you will have to get your name off the bonds, one way or another, retitled in your daughters’ names, cashed in or placed in a trust. There will most likely be some tax consequences to this as well, as most bonds have to deal with deferred income that may have to be realized, although sometimes a trust can help keep the deferral of income going. This will all have to be analyzed on a case-by-case basis.
As to your income, if you are looking for Community Medicaid (Medicaid outside of a nursing home, like home care), we can likely protect all of your income through a pooled trust and you can still be eligible for Medicaid.
I hope this helps! Please forward this information to your friends and relatives to share these informative answers to some very commonly asked questions.
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