| FIXING UP A TRUST HOUSE….. read on:
CLIENT QUESTION:
If I want to sell my personal residence, which is in an irrevocable Medicaid trust, can the fix-up expenses to sell the house be paid for by the trust?
MY RESPONSE:
This is a bit of a gray area.
There is no clear case law on this that I am aware of, which usually means it is worth proceeding carefully.
On one hand, you could make the argument that the trust should do what it needs to do to maximize the value of its asset. If spending money on repairs or improvements increases the sale price, that seems reasonable.
On the other hand, many of these trusts are written so that the grantor is responsible for maintaining the property. That is part of how the structure is designed. That is where the tension comes in.
If the trust starts paying for what looks like the grantor’s obligation, you have to ask whether you are drifting away from how the trust was intended to operate. That is usually not the direction we want to go.
So while there is an argument that the trust can pay these expenses, I tend to be more cautious, especially when the trust clearly puts maintenance responsibility on the grantor.
Trying to convince Medicaid that we are right is usually an expensive way to go. This is one of those situations where both sides have a reasonable argument. That usually means it deserves a closer look before moving forward.
I hope this helps. |
Save as PDF