THE EVERETT ADVOCATE – FRiDAy, ApRil 29, 2022 Page 23 Benefit Of Transferring Home To Irrevocable Trust O ne of the benefits of transferring your home to an irrevocable trust is that you start the five year look back period if one of the goals is to protect your home against a possible nursing home stay. If structured as a grantor-type trust, the Trust would be able to sell the home and you would still be able to take advantage of the $500,000 capital gain exclusion on the sale of a principal residence for a married couple ($250,000 for a single person). If the home is sold, the sales proceeds would have to remain in Trust and invested by the Trustee, whether in a certificate of deposit, savings account, stock or bond portfolio, etc. The sale of the home does not start the five year look back period all over again. The Trustee may also reinvest the sales proceeds in another principal residence. The net sales proceeds of the home must be used to purchase the replacement home. If the purchase price of the reriod, the Trust principal would be protected. Any net income derived by the Trust would be paid to the nursing home as part of the Patient Paid Amount (PPA), along with social security income, pension income, etc. Another benefit of transferplacement property is much less than the sales proceeds of the home that is sold, the difference would remain in the Trust to be invested accordingly. Typically, the Settlor of the Trust would have the right to receive income generated by the Trust. This income could serve to supplement the Settlor’s living expenses. The income would be distributed to the Settlor and taxed on his or her income tax return. If the Settlor were to go into a nursing home after the expiration of the five year look back pering your home to an irrevocable trust as opposed to directly transferring your home to your children with a reserved life estate, is that the Trust will protect your children in the event of a divorce or civil litigation case against them. If you prefer, you can include a provision in the Trust that one child will serve as Trustee of your other child’s Trust share (and vice versa) or you can include a provision for the appointment of a disinterested Trustee. If a son or a daughter were to predecease you, his or her share would remain in Trust for his or her own children to be administered pursuant to the terms of the Trust. That child’s share would not constitute part of his or her probate estate which involve significant time delays and cost. Furthermore, if your child died prior to you while receiving MassHealth benefits after the age of 55, MassHealth would not be able to pursue repayment from the Trust share belonging to your deceased child. MassHealth can only collect against the probate estate. This is another reason why a Trust is far superior than a deed to a child with a reserved life estate. With so many people living well into their 80’s and 90’s, it is not uncommon for a child to die before his or her parents. If that were to happen, the child’s estate would have to be probated as the “remainder” interest in the home was owned by the child at the time of his or her death. As part of the probate process, MassHealth is required to be notified of the probate proceedings. It is at this time that MassHealth will determine if benefits have been paid to the deceased. If so, MassHealth will file a claim in Joseph D. Cataldo is an estate planning/elder law attorney, Certified Public Accountant, registered investment advisor, AICPA Personal Financial Specialist and holds a masters degree in taxation. probate court in order to seek repayment. Placing the home in an irrevocable Trust would avoid these complications. MassHealth would not be able to lien the home as the home was not given directly to the deceased son or daughter. It was deeded to the irrevocable Trust instead.
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