The Listen to Lawrence Letter: Reinvestments

CLIENT QUESTION:

You created an irrevocable Medicaid trust for my Mom. The trust owns 25% of a commercial income-producing property. If that property is sold, how does this affect the trust? How would a 1031 exchange affect it?

MY RESPONSE:

The sale and then reinvestment of an asset inside the trust does not affect the trust and does not start an additional look-back problem. Same answer with a 1031 exchange. Go for it! However, keep in mind that the capital gains tax on the sale, if any, will be the responsibility of your mother, not the trust.

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