However, if your trust is irrevocable, you don't have the power to remove property from the trust. If so, the trustee may be able to move assets to a new revocable trust. For example, if you are transferring stock, the ownership line could read, “Jane Doe, as Trustee of the John Doe Irrevocable Trust dated Jan. 1, 2010.” Be sure you have appointed another person or institution to act as your trustee. This helps to lower potential estate tax ramifications. Transfer the assets by retitling each one into the trustee’s name. Once past, the grantor can apply for Medicaid while the property remains safely in the Irrevocable Trust, sheltered from children’s divorce and creditors. assets of an irrevocable trust to become subject to the estate tax of a decedent whose taxable estate is under $5,000,000, and whose estate could absorb the trust assets in his or her taxable estate without creating an estate tax liability. This includes cash, stock portfolios, real estate, life insurance policies, and business interests. Whether the trust is revocable or irrevocable, the holding period recognized by the trust carries over to the beneficiary—it does not restart when the assets are distributed. In addition, if some of their assets are greatly appreciated in value, this transaction could have negative income tax implications to you. Irrevocable trusts exist to remove money from the estate of the creator--called the grantor--of the trust. Frankly, just about any asset can be transferred to an irrevocable trust, assuming the grantor is willing to give it away. By including the asset in the taxable estate, tax-free step up … Asset protection – assets transferred into an irrevocable living trust become the property of the trust once the transfer is complete. That means that a stock that was purchased 6 months ago by the trust will carry over the 6-month holding period to the beneficiary. This allows the grantor to transfer assets, such as stock, to the trust without incurring any tax. Then, she can revoke the new trust agreement as soon as the assets are transferred. Conversely, transferring stock to an irrevocable trust may trigger gift tax. When you or your spouse (if they are part of the trust) pass away, any assets put into an irrevocable trust are not included in the estate for the calculation of Medicaid recovery, the estate tax, or probate. You can transfer property in and out of a revocable trust simply by changing the title, as you're entitled to do so. An irrevocable trust has gift and estate implications and if you do as you contemplate you could be needlessly giving up estate tax breaks that could come back to haunt you. In short, the grantor can form a trust, transfer assets into the trust and then wait out the Medicaid look-back period. As the name implies, an irrevocable trust is a rigid arrangement that can’t be readily terminated, amended or altered once signed by the grantor. An Irrevocable Trust can be useful for Medicaid Planning. The downside is that the assets you transfer into an irrevocable trust are out of your reach. What assets can I transfer to an irrevocable trust? When you transfer assets to an Irrevocable Trust, you may or may not still be the “owner” of the assets in the trust for tax purposes. Because this type of trust is meant as a tax shelter, removing money from an irrevocable trust can be nearly impossible for the grantor and difficult for the trustee. Sometimes it is advantageous to be deemed to be the owner and sometimes it is not. You no longer legally own and manage the assets. The trust agreement may also grant the trustee the authority to transfer assets. Again, state law might limit this option, and the beneficiaries may need to consent to the transfer.