Listen to Lawrence…IRA required minimum distributions and Irrevocable Trust questions answered

June 1, 2020

Dear clients and friends,

Here are more of your questions and my responses:


I have (3) IRAs of which I had taken my RMDs from last year. Does this mean that I will not be seeing any money taken out this year for each of them?
It appears that way to me, at least. Is what I’m saying correct?


Whatever you did last year has no bearing on what you do this year. This year, you do not have to take any required minimum distributions (RMDs) from any of your IRAs, 401Ks, 403Bs or any other retirement plans. Nevertheless, you may take any amount out you want, including all of it. Of course, any withdrawal will be subject to income tax but there will be no early withdrawal penalty this year if you are under the age of 59 1/2.


My wife and I have an irrevocable trust with your firm and are happy clients. Questions: I understand that if I add assets to my trust, my 5 year look back starts all over? Can I take funds from the trust to pay taxes or anything else?


This question is relevant to a client who created an irrevocable trust to protect assets from the cost of long term care. Perhaps they funded the trust with their house, stock, and/ or other assets. After a 5 year look back has lapsed, the assets in the trust will be protected from nursing home Medicaid. The client states that their 5 year look back is indeed over, but now they want to add assets to their trust.

Clearly, adding additional assets to the trust will create a new 5 year look back for nursing home Medicaid and, and as of October 1st, a 2 1/2 year look back for home care. These new look backs will have absolutely no impact on the assets already protected; they will only apply to the new transfers.

The problem is, if you need long term care before the second look back expires, you may need to return the assets to eliminate the second look back. This can be done in certain circumstances by opening up the irrevocable trust to take back the second transfers. You see, there is a way to partially revoke an irrevocable trust. However, partially opening up the trust to retrieve the second transfers may taint the protected first transfers. This is why we do not recommend adding to a trust but rather creating a second irrevocable trust to protect secondary transfers.

Your second question is very important and the answer is no. The trustee can not give you any asset in the trust nor can it pay any bill for you. Why? The answer is that if you can get the trust assets, Medicaid can get the trust assets. It is that simple. However, assets are not necessarily frozen inside the trust; with your consent, the trustee can take money out of the trust and give it to your children and grandchildren. Note that if you ever violate the trust by taking assets out of it for yourself, the entire trust will no longer serve to protect your assets.

I hope this helps!

Please pass this information to your family and friends and continue to keep your questions coming! If you are thinking about it, others are probably thinking about it too, so my answers will no doubt help you and many others. Let’s stay connected.