Client Counseling Software

RLT™ Explanation

RLT™ Defined
The RLT™ is a "REVOCABLE LIVING TRUST." This trust is created by the client (called "Grantor," "Settlor," "Trustor," etc.). The client has full right to amend and revoke the trust or any provision thereunder during the client’s lifetime. RLT avoids the need for probate and can provide for effective distribution of assets to heirs at death. An RLT can also provide extensive personal and detailed instruction for family in the event of client’s disability. The client has access to all income and all principal at any time, but none of the assets in the revocable living trust are protected from the reach of the nursing home. All assets held in the RLT would be considered “available” for purposes of Medicaid qualification.

FEATURES

Created by client (individual or joint).
Client can be sole or co-trustee.
Client retains right to income or principal from the trust.
Client retains the right to modify or revoke the trust at any time.
Grantor trust under IRC §671-678.
Client can make extensive “directions” for disability and/or income and/or principal use in distribution.

USES

Clients who want to avoid probate and want to get their assets to their children effectively and timely.
Clients who wish to provide extensive disability instructions.
Clients who want to maintain full control and access to all assets at all times.
Clients who want to provide asset protection to their heirs after death or to protect "spend thrift" or disabled beneficiaries.

BENEFITS

Income and principal available to client.
Client can terminate at any time.
Keeps client affairs private (don't have to share with children or public).
Retains ownership for full step-up asset values at death.
Permits assets to be distributed to beneficiaries in asset protection trust.
Can protect assets from nursing home needed by community spouse after client’s death.

COUNSELING ISSUES

Transfers "to" or "from" will be subject to a look back.
All assets are considered "available" to Medicaid and other creditors.

MIT™ Explanation

MIT™ Defined
The MIT™ is "MY INCOME TRUST." Created by client and permits client to retain all income from the trust and maintain full control over their assets. Client's assets are protected from the reach of a nursing home, if needed. This trust is utilized when client's assets exceed the Medicaid qualifying amounts and exemptions. In almost all jurisdictions, assets retained in MITÔ are not considered available resource for Medicaid qualification after the expiration of the penalty period for the transfer to it. Client retains the right to all income on trust assets but gives up access to principal.

FEATURES

Irrevocable Trust created by client (individual or joint).
Client can be sole or co-trustee.
Grantor trust under IRC §671-678.
Client retains income from trust assets for life or period of time.
Client gives up right to access principal. (Principal may be accessed in accordance with State law - right to revoke or amend - usually consent of beneficiaries.
Client can provide discretionary distribution of principal to a "class of people."

USES

Clients with excess resources (non-exempt) of less than 36 times the Medicaid divisor.
Clients who want to protect their assets and don’t need excess principal, but don't want to give up income or control of assets.
Clients are currently healthy and expect to remain independent for extended period of time.
Married clients whose joint income is below the MMMNA.

BENEFITS

Protects assets from nursing home, keeps income available, and client retains control of assets.
Keeps client's affair private (don’t have to share with children).
Permits assets to be distributed to beneficiaries in an asset protection trust.
Retain ownership for step-up asset values at death.

COUNSELING ISSUES

Transfer penalty assessed on all transfers to trust.
Client gives up access to principal. (Client may never go to nursing home.)
Income may go to Medicaid.

FIT™ Explanation

FIT™ Defined
The FIT™ is a "FAMILY IRREVOCABLE TRUST." This trust is created by the client and permits the client full control over their assets while protecting the assets from the reach of a nursing home, if needed. The client does not have the right to income or principal from the trust. This trust is utilized when the client's assets and/or income exceed the Medicaid exemptions and qualifying amounts and the client does not need direct access to the income or excess assets to maintain their lifestyle. Client can have access to income and principal indirectly by distributing it to anyone in the "class" of people they select to be beneficiaries. Assets retained in the FIT™ are not considered available resources for Medicaid qualification after the expiration of the penalty period for the transfer to it.

FEATURES

Irrevocable trust created by client (individual or joint).
Grantor trust under IRC §671 through 678.
Client can be sole or co-trustee.
Client retains 100% control of all trust assets.
No direct access to income or principal from the trust.
Client can provide discretionary distributions of income or principal to a "class" of people using "ascertainable standards."

USES

Clients who want to protect their assets but not give up control.
Clients with spouse in a nursing home or expected to be and client does not want to give up investment income to Medicaid.
Clients don't need direct access to excess income or principal.
Clients whose excess assets are more than 60 times the regional divisor.

BENEFITS

Protects income and assets from nursing home but keeps it available to family.
Client retains full control and management of all assets.
Client's affairs kept private (does not have to share information with children).
Permits distributions to client's beneficiaries in asset protection trusts.

COUNSELING ISSUES

Transfer penalty assessed on all transfers to trust.
Client gives up access to income and principal and can only access it through someone in "class of beneficiaries" (that would "give back").
Creates a look-back of 60 months and can create a penalty period of greater than 60 months if not funded properly.
All income taxed to client even though he doesn’t receive it.
Included in client's estate at death (step-up in basis).

KIT™ Explanation

KIT™ Defined
The KIT™ is "KID'S IRREVOCABLE TRUST." This trust is created by the children of clients (typically with assets gifted to children by clients). This trust ensures client is subject to a 36-month look-back period instead of 60-month period when assets are transferred to a trust. This trust is utilized when clients have excess assets that create a penalty of more than 36 months. The KIT™ can permit payments of income and/or principal to the client, the client's grandchildren, siblings or other class of beneficiaries, but not the client’s children (the grantors). Assets in KIT™ are not owned by the client, and therefore, not considered when client applies for Medicaid.

FEATURES

Irrevocable Trust created by client's CHILDREN.
Client can be sole or co-trustee.
Client has access to income or principal in trust.
Grantor trust under IRC§671-678 for children.

USES

For clients who have transferred assets to their children before retaining you.

BENEFITS

Protects assets from nursing home.
Ensures transferred asset available if client does not stay healthy through the look-back period.
Keeps income and assets available to client.
Client can keep control of assets (if children name them trustee).

COUNSELING ISSUES

Client must share some/all financial information with children.
Assets gifted to children (loss of control). Gift is subject to gift tax and no step-up in basis to kids (if non-cash transferred.) No guarantee kids will create KIT&trade.
Right to income or principal may have to be disclosed to Medicaid when client applies (should not matter because discretionary).
Gift tax issues to kids upon creation (cross gift issues to kids?) and distribution from KIT™.
All income earned on trust taxed to kids regardless of who Trustees (parents) distribute it to.
Can create "friction" in children’s marriage and be subject to equitable distribution if children divorce (if not set up properly).
Are trust assets available resource? - should not be.
No asset protection trust for children of client (unless converted to MIT™/FIT™).
Can result in higher income tax paid (at kid's rate rather than parent’s).
Children cannot be part of “class” to distribute to.