| Have you ever heard of trust decanting?…read on:
CLIENT QUESTION:
Good morning, Mr. Davidow – I just love the “Listen to Lawrence Letter” questions and answers! So informative! My question is, will decanting a Medicaid Asset Protection Trust trigger a restart of the 5-year lookback period? Many thanks for your time and expertise.
MY RESPONSE:
Wow, this is a sophisticated question, but I wish it had more to do with decanting a good bottle of Cabernet rather than having to do with a Medicaid trust!
Decanting simply means pouring the assets from one trust into another trust with more favorable provisions. This is not an available option with every trust. To make this work, the trustee must have a lot of discretion over the trust principal, but if she does, then decanting to a new trust is an option.
Now to your question. Does decanting a Medicaid irrevocable trust restart the five-year Medicaid lookback period?
The answer is generally no!
The lookback period is triggered only when you (the grantor of the trust) transfer something from your own name into your trust (or to someone else). Medicaid does not get a second bite at the apple. Instead, Medicaid ordinarily treats this as a continuation of the original trust arrangement rather than as a new transfer from the grantor. As a result, the original transfer date remains the relevant date for Medicaid purposes.
So, I ask you, since there is no problem with Medicaid and decanting, why would someone want to do this? The answer is that decanting can be a valuable tool for updating an older trust. It may allow a trustee to improve administrative provisions, address changes in the law, strengthen asset protection, add special needs planning provisions, or solve other issues that were not anticipated when the original trust was created.
In other words, decanting can sometimes give an old trust a much-needed facelift without starting the lookback all over again. |
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