| Buying up?… Read on:
CLIENT QUESTION:
We have our home in an irrevocable trust prepared by your firm. It is past the lookback period. If we sell it for say $500,000 and buy a new house for $600,000, can that new house replace the original one in the same trust with no new lookback period? Does the increased value of the new home force a new lookback?
MY RESPONSE:
The answer depends. If you sell the house for $500,000 in the trust, where are you getting the other $100,000 to buy the next house? If you are adding it to the trust, then there will be a new look-back on the additional amount. We would not recommend this. If the trust is borrowing the $100,000, this will not cause a look-back problem because no additional equity is being added to the trust. If the trust already has $100,000 in it that it will use to purchase the new house, that also will not cause a new look-back because no new equity is being added to the trust.
One word of caution, Medicaid does not like it when you get more of a benefit from the trust than when you started the trust. Since you would have the right to enjoy a $600,000 house rather than a $500,000 house, they could make the argument that you are getting a benefit from the trust that you were not allowed to get. I do not think this is a winning argument for Medicaid, but the jury is out on this question.
I hope this helps. |
