ALERT: Irrevocable Trust Law Change

Usually I try to write articles that are interesting, fun or at least minimally intriguing. This time, I’ll get right to the point – there’s been a Major Development in the use of irrevocable trusts for MassHealth (Medicaid) planning. These trusts have been under fire from the Department of Medicaid for years, and we finally have some court decisions we can rely on.

What Should You Do Now? If you or a family member (probably a parent) included an irrevocable trust as part of an estate plan, it needs to be reviewed as soon as possible. The trust might be referred to or titled as an asset protection trust. No matter the title, it’s entirely likely that it will not work they way originally thought, and a back-up plan must be developed.

We’ll be reaching out to the clients for whom we created this kind of trust. In the meantime, feel free to reach out to us sooner if you’d like. There’s no fee to our clients for reviewing your trust with you, and developing a Plan B. A small fee to cover our time will apply if you’re not already a client. And don’t blame the messenger, but implementing a Plan B will undoubtedly cost a bit, regardless of whether you’re a current client or not.

What’s the Issue with Irrevocable Trusts? Under Medicaid law, if an applicant has even the tiniest hint of access to assets in a trust, then all the assets in the trust may be considered completely available. Under the recent decisions from the state’s Supreme Judicial Court, some extremely common, routine trust provisions are now deemed to give that minimal amount of access needed to defeat the trust.

What is an Irrevocable Trust? Think of a trust as a bucket. For typical estate planning uses, people have a revocable trust. It’s like a bucket they can freely access. To protect assets from the costs of long-term care, we use an irrevocable trust. It’s like a bucket with a lid and a padlock. Once assets go in, they’re not coming out. And because you no longer have access to those assets, they’re considered no longer yours and are protected for whomever you’d said will inherit them later.

Why Might I Want/Have an Irrevocable Trust? There are two primary reasons to use an irrevocable trust. One is to decrease estate tax liability and another is to protect assets. In the case of long-term care planning, an irrevocable trust is a tool that can help guarantee a minimal inheritance for children. It’s not a tool that everyone can use – a lot depends on each individual’s specific circumstances.

Still Have Questions? Getting your planning done was hard enough in the first place. Having to revisit it can feel overwhelming. I get it. We’ll make it as simple and painless as possible. Just reply to the email that pointed you to this article, comment below that you want to talk about an irrevocable trust or give us a phone call any time.



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