Trust Funding Transfer Penalty Look Back Period

[JacFlasche]

If a funding tranfer is made to a Third Party Special Needs Trust, is there a five year look back period for the funder if they apply for and need Medicad funding for themselves?

 

[LdiJ]

If a funding tranfer is made to a Third Party Special Needs Trust, is there a five year look back period for the funder if they apply for and need Medicad funding for themselves?

Are you talking about Medicaid for nursing home coverage? If so, yes there is a 5 year look back period.

 

[FlyingRon]

Any illegal transfer is actually problematic. How old are you? Are you disabled? Is the trust set up with the State as the beneficiary? What was the nature of the asset you are concerned about?

 

[JacFlasche]

Any illegal transfer is actually problematic. How old are you? Are you disabled? Is the trust set up with the State as the beneficiary? What was the nature of the asset you are concerned about?

It is a third party special needs trust, so no the state is not the beneficiary. If it were a self funded special needs trust the state would be the beneficiary and I believe in that case there is no look back period. However that is not the situation. Yes a third party special needs trust is usually only set up for the disabled. My aunt is going to leave her house and some funds to the trust when she passes away. I was wondering if it could be protected by transferring it to the trust now, or it there would be a look back period.

 

[Taxing Matters]

My aunt is going to leave her house and some funds to the trust when she passes away. I was wondering if it could be protected by transferring it to the trust now, or it there would be a look back period.

Pretty much any significant gift she makes, whether to an individual or a trust set up for that individual is going to be included in the 5 year look back period should she apply for Medicaid benefits. She can't divest herself of assets and then promptly get Medicaid benefits.

 

[FlyingRon]

She can't put money/assets into a third party special needs trust. That's not allowed, lookback or not.

 

[Taxing Matters]

She can't put money/assets into a third party special needs trust. That's not allowed, lookback or not.

And what is your reasoning for that?

 

[LdiJ]

She can't put money/assets into a third party special needs trust. That's not allowed, lookback or not.

I echo TM's curiosity about that statement as well. Lots of people with disabled children or other relatives put money in third party special needs trusts. Is your statement based on the assumption that there is no such person?

 

[FlyingRon]

I seemed to misunderstand what he was saying. I though the was trying to hide his own assets in the trust.

 

[JacFlasche]

Thanks for the responses:

It is a Third Party Irrevocable Special Needs Trust. No one is trying to hide anything or do anything that is illegal. It says right in the trust document that anyone can contribute to the trust at any time. All I am interested in is whether or not there is a look back period. I have been told by some that there is no look back period for someone who contributes funds to such a trust, I have been told by others that there is the standard 5 year look back period. Just to make it clear: this trust is not self-funded or revocable, and the beneficiary is totally disabled. If anyone can quote the specific law about this in PA or USA, I would be most appreciative. I have not been able to find anything that specifically addresses this issue. TIA

 

[ShyCat]

You probably aren't finding anything that specifically addresses this issue because it's not an exception to the rule. Unless there's a specified exception that says the contribution to a special needs trust is not to be treated as a gift subject to the five-year look back period, then it is. It does not have to be specifically listed as being subject to the five-year look back period since it is, in fact, a monetary gift.

 

[JacFlasche]

You probably aren't finding anything that specifically addresses this issue because it's not an exception to the rule. Unless there's a specified exception that says the contribution to a special needs trust is not to be treated as a gift subject to the five-year look back period, then it is. It does not have to be specifically listed as being subject to the five-year look back period since it is, in fact, a monetary gift.

That's makes sense. Since the no lookback for a self funded revocable trust is stated. Thanks