Updating an Irrevocable Trust
July 28, 2022
Dear Clients and Friends:
What if you already have a funded Medicaid trust but you want to add to it or change things later?
CLIENT QUESTION #1:
If you add a saving account to an existing irrevocable trust, does that subject the entire trust to have a 5-year look-back or just any additions added later on?
MY RESPONSE #1:
Each transfer to the trust gets its own 5-year look-back. For example, let’s say that over 5 years ago you put your house in the trust. We know it is now protected. Today you want to add a savings account to the trust. This new transfer will have a new 5-year look-back. Usually, we don’t like adding transfers to a trust that already owns protected assets because it takes away a lot of flexibility if you need Medicaid before the new 5-year look-back is over. Therefore, consider a second irrevocable trust in such circumstances, leaving the protected trust alone.
CLIENT QUESTION #2:
Do you evaluate irrevocable trusts made by another lawyer and what would be the cost?
MY RESPONSE #2:
I am often called upon to give a second opinion. I charge by the hour for this service.
CLIENT QUESTION #3:
Can you update a trust or does this again open it up to a new look back?
MY RESPONSE #3:
The answer depends upon what changes are necessary. There should be no problem if you want to change the trustee or a beneficiary because the original trust probably says that you can. However, if you wanted to actually change the language of the original trust, Medicaid may argue that you stepped over the line and the trust no longer works..but the better answer remains…IT DEPENDS.
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peace, health, and happiness,
Lawrence Eric Davidow