The Listen to Lawrence Letter: Can I change banks if my bank account is in an Irrevocable Medicaid Trust?

CLIENT QUESTION:

Hi Mr. Davidow,

Your firm created an irrevocable Medicaid trust about 6 years ago for us and at that time we set up a bank account in the name of the trust. We would now like to move that bank account from one bank to another. i.e. Chase bank to Citibank. Does that start the 5-year clock all over again? Can we just simply close one account and open the other? Thank you.

MY RESPONSE:

Feel free to do anything you want. The trustee is allowed to liquidate any asset in the trust and then reinvest that money elsewhere. The trustee could close the Chase account and open a Citibank account. The trustee could close the Chase account and buy CDs, money markets, stocks, bonds, mutual funds…etc. You get the idea. The trustee is simply free to reinvest the money (as long as it is not designed to increase the benefits to the grantor).

Why does this not affect the 5-year look-back? The 5-year look-back is only in play when YOU, the grantor, transfer something from YOUR NAME TO THE TRUST. Medicaid only gets one bite at the apple. Once an asset is transferred to the trust (causing a 5-year look-back), subsequent changes are irrelevant.

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