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In order to assist you in qualifying for Medicaid, the trust must be irrevocable. However, in New York even an irrevocable trust can be altered or undone if necessary.

As a general rule, you can manage your assets in the trust the same way you would outside of the trust. If you own a stock portfolio, you can continue buying and selling stock. If your house is in the Medicaid trust you will retain property tax exemptions and the ability to sell your house without requiring permission from anyone. The major restriction on the trust is that you cannot distribute principal to yourself. If you need a new roof on the house, principal can be used for that purpose (or anything connected to your residence), but you cannot simply cash $50,000 in principal out of the trust to purchase a new vehicle or go on a trip.

If you want or need to withdraw principal from the trust, the Trustee can make a distribution of principal to a child/grandchild or other beneficiary of the trust specifically designated in the trust document. That person would then make a tax-free gift of the principal back to you. This has to be structured in a way to avoid gift tax reporting, and you need to consult with an attorney or CPA to do this properly.

The major hurdle for most people is the restriction not allowing principal to be distributed to the trust creator. We spend a lot of time with clients discussing trust funding and making sure they have enough money outside of the trust in order to not encounter this problem. The only other major disadvantage is for people who do not make the 60-month loopback period and potentially have to unravel the trust to complete the Medicaid qualification process.

Anyone who is over eighteen (18) years of age and that you trust implicitly to make responsible decisions that will consistently be in your best interest. Most often this is someone in your family. Lawyers, accountants and other professionals can also serve in this capacity if no one in your family is available to handle the responsibility.