Trust Distribution Into Another Trust

[jshenn]

What is the name of your state (only U.S. law)? WI

My mom will be receiving a distribution from the trust of her life-partner in a few weeks. This distribution will be around $115k. She is currently living in a senior-only, rent-controlled apartment where income has to be verified annually.

Others in my family have said that my mom should have the distribution made into a trust of her own which will in turn shelter that amount from being reported as income.

I am far from even a novice in this type of planning, but their suggestion does not sound legitimate to me.

Before I waste time involving an estate planning professional, I was hoping to get some advice on whether this strategy holds any promise.

 

[curb1]

It really comes down to how your Mom's living facility determines incomes and assets. This criteria varies greatly from different organizations. If rent is determined by assets she will be $115,000 "richer" so that might be appropriate to pay more. If she doesn't like their rules she should probably move somewhere else where she doesn't have to hide her assets.

 

[colourfastt]

Also, if this second trust is a typical "grantor's trust" then the distribution would be "income" for all purposes.

 

[FlyingRon]

Trust to trust transfers are quite common. However, there's rarely any dodges that a trust directly solves while the parties involved are still alive. Medicaid and most public assistance is not going to be fooled by such a dodge. If you hide or transfer assets outside of limited things allowed (like prepaying certain end-of-life expenses), you run the risk of her coverage being suspended. Trusts and elder law issues are not something that you should casually be screwing around with. I'd recommend her getting professional advice (and frankly, if she has not done so, get her will, advanced medical directives, and medical and general powers of attorney laid down.).

 

[jshenn]

Thanks to all for the advice. I agree that professional help is a must. I just wanted to go into that discussion with a bit more knowledge. From what you have told me, it doesn't sound like there is a "magic bullet" to shelter income and we should be wary of any advice we get to the contrary. We do have the prelims taken care of (will, ect). This new twist was unexpected.

 

[OHRoadwarrior]

We the tax payers salute you!!!