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How does an irrevocable trust function/operate?

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#1
My parents are interested in placing their money, about $250k, in an irrevocable trust with my brother and I as trustees. The purpose is long term estate/medicaid planning for them. I've read a lot about this so far: benefits, potential problems etc. I understand that we'd have to file annual income taxes for interest earned on the money. But my question is, how exactly does one use the trust funds to purchase something? Do I go to a realtor, show proof that I'm the official trustee, and write a check from the irrevocable trust bank account to buy a house (with my parents concurrence, for them to live in)? and then go to a furniture store and also write a check from the same account for furnishing said house?

Also, what if, as trustee, I thought it was a good idea to buy a bag of potato chips with the trust money? Or blow it all in Vegas? I will never do either because the money is intended to help my parents as they grow older (and then to be passed down to us after they die) but, just wondering: who polices a trustee?

Thanks
Theodore2
 


LdiJ

Senior Member
#2
My parents are interested in placing their money, about $250k, in an irrevocable trust with my brother and I as trustees. The purpose is long term estate/medicaid planning for them. I've read a lot about this so far: benefits, potential problems etc. I understand that we'd have to file annual income taxes for interest earned on the money. But my question is, how exactly does one use the trust funds to purchase something? Do I go to a realtor, show proof that I'm the official trustee, and write a check from the irrevocable trust bank account to buy a house (with my parents concurrence, for them to live in)? and then go to a furniture store and also write a check from the same account for furnishing said house?

Also, what if, as trustee, I thought it was a good idea to buy a bag of potato chips with the trust money? Or blow it all in Vegas? I will never do either because the money is intended to help my parents as they grow older (and then to be passed down to us after they die) but, just wondering: who polices a trustee?

Thanks
Theodore2
The people most likely to police a trustee is the beneficiaries of the trust. In other words, your parents for now, and possibly your brother as well. Should someone abuse their position as a trustee, eventually the police and the courts would get involved. In your case, the elder abuse people might get involved as well.

My question would be whether or not the trust is even in the best interests of your parents at all? Medcaid nursing homes are not the most pleasant of places to reside, and their own money could go a long way to providing the a better nursing home experience should they ever need one.
 
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