The Listen to Lawrence Letter: Changing Trust Beneficiaries

CLIENT QUESTION:

I have an irrevocable Medicaid trust that has 3 beneficiaries, and the trust is divided equally among the 3. Is it possible to change the beneficiaries so that the 3 current beneficiaries each get 25%, and the last 25% is divided equally among my grandchildren?

MY RESPONSE:

In many irrevocable Medicaid trusts, the answer would be no. But in the Medicaid trusts that I draft, the answer is usually yes.

That is because I include what is called a limited power of appointment. This allows you to change how the assets are ultimately distributed, within a defined group of beneficiaries.

So while the trust is still irrevocable, there is built-in flexibility to adjust who receives what at the end.

The cool thing about these trusts is that even though they are irrevocable, you can still change beneficiaries, much like you can change beneficiaries in your will. Families change. Circumstances change. Sometimes your thinking changes.

There are limits. You cannot simply redirect the assets anywhere you want. The power is restricted to a defined class, usually your descendants. But within that group, there is often room to make adjustments like the one you are describing.

This is one of those features people are very happy to have later.

If anyone you know would like to

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tell them to send their email address to info@davidowlaw.com and I’ll add them to the list!

As always, please send your questions in! If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.

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