For example, in those states where irrevocable trusts, like the ElderDocx Medicaid Asset Protection Trust, are not viewed favorably and are almost always counted as an available resource, children could create a Third-Party Supplemental Needs Trust for their parents, and the parents could make gifts to their children. When doing this, it's very important that the creation of the trust and the gifts from their parents are independent acts to avoid the issues present in Hedlund v. Wis. Dept. of Health Services.
Note that ElderCounsel doesn't favor direct gifts where there is an alternative. Gifting through an irrevocable trust allows the grantor to retain a limited power of appointment, which causes estate inclusion, which in turn causes an adjusted basis at the grantor's death. This can't be done with a direct gift. Further, a direct gift is subject to the donee's creditors, whereas a trust can be structured to protect the assets from the beneficiary's creditors.
The changes to the Third-Party Supplemental Needs Trust allow any number of people to create a trust for any number of beneficiaries, leading to some other creative solutions. Maybe siblings want to create a trust for their disabled sibling. Or perhaps a group of friends want to create a trust for a disabled friend. There's a lot of flexibility with this new design.
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