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Rental income from your principal residence
and the Medicaid Trust
CLIENT QUESTION:
Hello Lawrence,
I wanted to inquire, if your home is in a Grantor Irrevocable Medicaid Trust, and the home is rented out…Could you pay for the Condo maintenance fees and Property Taxes from the rent the Condo receives in the Trust? What about the homeowners’ insurance? Does the Trust pay for this or the Grantor of the Trust? Thank you in advance.
MY RESPONSE:
I want to be perfectly clear…I never want the trust to pay a bill related to your principal residence. If you follow my advice, everything will be clear to Medicaid and no questions will be raised. When dealing with Medicaid, you want to make things as simple as possible, giving Medicaid no reason to believe that you are benefitting too much from the trust. Therefore, you should pay the maintenance fees, property taxes, insurance, and just about every other bill that is related to the house.
This advice should be easy to follow in this case because the way I draft my trusts is to mandate that any income the trust receives from renting out the principal residence must be paid to the trust Grantor (you). Thus you will have the income to pay these bills.
Please note that most of my trusts do not allow the trustee to pay out income to you…just the income from the principal residence, which is usually zero. This is a rare case where the principal residence is rented out…so take my advice in this context. |
