The Listen to Lawrence Letter: Warning – Irrevocable Trusts Cannot Pay Your Bills
October 26, 2021
Dear Clients and Friends:
I am not answering a client question today. Instead, I decided to dedicate this edition of the LISTEN TO LAWRENCE LETTER to put the fear of God into my clients who create irrevocable Medicaid trusts. These trusts work great when you play by the rules. The idea is to place certain assets of yours into the trust, in a way that you cannot get them back. Remember, if you can get them back, Medicaid can get them back. Sure, I draft these trusts so that you can still live in your home placed in the trust; in other words, I draft the trust so that you retain certain rights. However, I never draft the trust so that you can take back your money at any time or use the trust money to pay your bills.
THE TRUST CANNOT PAY YOUR BILLS!
The trust cannot pay your property taxes or any of your utility bills…or any other bills you may have. The trust cannot pay for aides to come into the house to take care of you. Nothing!
The problem is that if you violate this simple rule, if you ignore the language of the trust that prohibits you from taking your money back, then Medicaid will ignore the trust as well. In theory, if you took a dime out of the trust for your own benefit, the trust NO LONGER WORKS! Or I should say that the trust remains a trust, but it will no longer work to protect your assets from Medicaid.
BUT LAWRENCE, WHAT IF I NEED THE MONEY?
Same answer: the trustee cannot give you the money or pay your bills.
However, with your consent, the trustee can pay out the money to your trust beneficiaries (children and grandchildren). It will then become their money and they can do anything they want with their money, such as taking a trip around the world or helping their family.
Reach out to us BEFORE you do anything that could possibly destroy the integrity of the trust and leave it open to the long arm of 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.
And, if anyone you know would like to receive this
Listen to Lawrence Letter, just have them email me at
firstname.lastname@example.org and I’ll add them to the list!
As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.
Let’s stay connected.
Until next time,
peace, health and happiness,
Lawrence Eric Davidow