| Grantor vs. Trustee Control
CLIENT QUESTION:
Hi Lawrence,
My husband and I have our two houses in a trust with you for some time.
In addition to the two houses, we also have two IRAs and a joint account that we want to put in a separate trust. My question is, if we do this – can we still manage the funds (sell, trade, or withdraw from them) or does our Trustee have to do this? Thank You.
MY RESPONSE:
You have to understand the nature of an irrevocable Medicaid trust. The purpose of the trust is to transfer ownership and control of the assets from you to the trustee. The trustee thereafter is the one who has the right to buy, sell, and spend the assets in the trust, according to the directions in the trust. You, as the Grantor, CANNOT retain these rights. However, you do have the right to replace the trustee at any time if they are behaving naughty. We can also build certain directions into the trust limiting the trustee’s ability to do whatever they want…such as they cannot sell an investment without your consent.
Having said all this, and while I do not condone the following, I have heard through the grapevine that some trustees share user names and passwords with their grantors. Nevertheless, assets cannot be withdrawn by anyone for the direct benefit of the grantor. Remember, if the grantor can get the money, Medicaid can get the money.
On another note, IRAs should not be transferred into an irrevocable Medicaid trust because the account would immediately be subject to income tax. Bad move! Besides, there is a way to exclude IRAs from being considered an ASSET for Medicaid purposes.
If you are considering creating another trust to protect assets, set up a consultation with us ASAP. |
