May 1, 2010 12:00 PM

Other than its effective use as an elder law planning tool, an irrevocable income only Medicaid trust may not be the way to go. Here's why

By Mark Merric & Robert D. Gillen

There's a new type of asset protection technique that's evolved from a well-established and highly effective elder law planning tool: the irrevocable income only Medicaid trust (IIOMT). We find the IIOMT to be an extremely effective tool in Medicaid planning. But the IIOMT is now being marketed outside the Medicaid arena as an asset protection tool for middle income families against all creditors. We question the use and effectiveness of the IIOMT as an asset protection tool, as against any creditor other than the government in the Medicaid context.

For elder law purposes, when (1) property is given to a trust five years in advance; (2) the settlor holds only a mandatory income interest;¹ and (3) the settlor's income is below certain levels, then the trust is not considered as a countable resource in qualifying the settlor for Medicaid. By giving property to an IIOMT, the remainder interest may then pass to the settlor's beneficiaries free from any governmental claims for reimbursement of Medicaid expenses paid on behalf of the settlor. (See “The Medicaid Trust,” p. 18, for details.)

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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

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