Grantor Irrevocable Income Only Trust Thoughts

[nobhead]

Does anyone have experience with these trusts?

I met with an Elder Law Attorney awhile back and was recommended to use one of these. The advice was to place my home, a commercial building, and most of my taxable investments into a Grantor Irrevocable Income Only Trust. He also suggested making the trust the beneficiary of my life insurance and IRA's.

I was told I would still get the income from the assets but the principal would forever stay in the trust for my beneficiaries (children). Taxes would be paid by me on my 1040 and not by the trust while I am living. Also, the assets would get a step-up basis in the assets at my passing.

I realize that the Build Back Better act was trying to do away with the benefits of these types of trusts and the step-up basis. I read last week that the version passed by the House of Representatives no longer included these features.

It also protects assets put in the trust from Medicaid (after 5 years) and from being recovered by Medicaid.

I have attached a link to a similar description of a trust like this. It is NOT the attorney or exact plan recommended but is nearly identical to it.

Any comments and questions would be greatly appreciated.

TIA

[Chahta]

Nov 30, 2021 2:34:50 GMT nobhead said:

Does anyone have experience with these trusts?

I met with an Elder Law Attorney awhile back and was recommended to use one of these. The advice was to place my home, a commercial building, and most of my taxable investments into a Grantor Irrevocable Income Only Trust. He also suggested making the trust the beneficiary of my life insurance and IRA's.

I was told I would still get the income from the assets but the principal would forever stay in the trust for my beneficiaries (children). Taxes would be paid by me on my 1040 and not by the trust while I am living. Also, the assets would get a step-up basis in the assets at my passing.

I realize that the Build Back Better act was trying to do away with the benefits of these types of trusts and the step-up basis. I read last week that the version passed by the House of Representatives no longer included these features.

It also protects assets put in the trust from Medicaid (after 5 years) and from being recovered by Medicaid.

I have attached a link to a similar description of a trust like this. It is NOT the attorney or exact plan recommended but is nearly identical to it.

Any comments and questions would be greatly appreciated.

TIA

Let's hope it stays that way in bill to be signed. That is one provision that helps small businesses, farms and investors from the greed grab of the government. When they run out of ways to tax raise revenues, they come up with agressive thought like taking away the step-up.

I think it may be good advice. When my father died their trust split into 2 and his trust is as you describe for my mother as beneficiary. Individual taxes rates are generally less than what the trust rate is. I was not aware of shielding the trust from Medicare.

[nobhead]

Dec 7, 2021 16:00:11 GMT Chahta said:

Nov 30, 2021 2:34:50 GMT nobhead said:

Does anyone have experience with these trusts?

I met with an Elder Law Attorney awhile back and was recommended to use one of these. The advice was to place my home, a commercial building, and most of my taxable investments into a Grantor Irrevocable Income Only Trust. He also suggested making the trust the beneficiary of my life insurance and IRA's.

I was told I would still get the income from the assets but the principal would forever stay in the trust for my beneficiaries (children). Taxes would be paid by me on my 1040 and not by the trust while I am living. Also, the assets would get a step-up basis in the assets at my passing.

I realize that the Build Back Better act was trying to do away with the benefits of these types of trusts and the step-up basis. I read last week that the version passed by the House of Representatives no longer included these features.

It also protects assets put in the trust from Medicaid (after 5 years) and from being recovered by Medicaid.

I have attached a link to a similar description of a trust like this. It is NOT the attorney or exact plan recommended but is nearly identical to it.

Any comments and questions would be greatly appreciated.

TIA

Let's hope it stays that way in bill to be signed. That is one provision that helps small businesses, farms and investors from the greed grab of the government. When they run out of ways to tax raise revenues, they come up with agressive thought like taking away the step-up.

I think it may be good advice. When my father died their trust split into 2 and his trust is as you describe for my mother as beneficiary. Individual taxes rates are generally less than what the trust rate is. I was not aware of shielding the trust from Medicare.

@chahta, thanks for your reply. I too hope that the final bill does not bring any of that back.

I still need to meet with my CPA to verify everything from a tax standpoint. The attorney I met with suggested putting all real estate and brokerage accounts in the irrevocable trust and create 2 revocable trusts (one for me and one for my wife) with smaller amounts in them. At the death of the first spouse, the will of the first to pass (via testamentary power of appointment) would send all assets of the 2 revocable trusts to a testamentary trust that would hold all assets from both. This would immediately qualify the surviving spouse for Medicare in a nursing home if needed. It also protects assets from the beneficiaries creditors, law suits, divorces, etc. just as the Grantor Irrevocable Income Only Trust does.

Anyone else have any ideas or experience with these types of trusts.

TIA

[fishingrod]

I believe there is still a 5 year look back period. Because those assets transferred into the Irrevocable Trust are considered a gift.

[nobhead]

Dec 7, 2021 17:41:23 GMT fishingrod said:

I believe there is still a 5 year look back period. Because those assets transferred into the Irrevocable Trust are considered a gift.

fishingrod,

Yes, there is a 5 year look back period on the irrevocable trust but upon the death of first spouse, everything goes to a testamentary trust which is not countable toward Medicare per the attorney. That is the way I understand it after a 2 hour face to face meeting and exchanging many emails with the attorney.

Thanks for clearing that up.