Q: I am hoping to open a trust fund for my adult children to inherit after my wife and I pass away. I keep hearing about the "look back" period - can you explain how that would apply to the trusts that I am hoping to set up?
A: A trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary. Different kinds of trusts can help you avoid probate, reduce estate taxes, protect assets or qualify for Medicaid.
There are two types of trusts: lifetime trusts and testamentary trusts. A lifetime or inter vivos trust is a trust that you establish during your lifetime while you are alive. A testamentary trust is a trust that is established at your death (e.g., under your Will) rather than during your lifetime. Either type of trust can be established for the benefit of your children.
The “look back” period (the period of time preceding a Medicaid application for which you will have to provide financial information) is 5 years. Gifts made during this period will generally disqualify a person for Medicaid benefits for a period of time based on the dollar value of such gifts. The transfer of assets to an irrevocable trust is treated as a gift and would be subject to the “look back” rules.
The “look back” period would be relevant to the trusts to be established by you and your wife, if you intend to engage in Medicaid planning.
Jayson J.R. Choi is an Associate of the Trusts and Estates, Corporate and the Municipal, Land Use & Environmental Compliance Law practices at Meyer, Suozzi, English & Klein, P.C. located in Garden City, N.Y. Mr. Choi represents clients in all aspects of Surrogate's Court proceedings involving issues that may arise in probate proceedings, in the administration of estates and trusts, and in accounting and guardianships proceedings. He is involved in representing clients in federal and state gift and estate tax audits. He also prepares wills and advance directives and handles commercial and residential real estate transactions.