How and Why Medicaid Planning Using Trusts Turns Into Estate Litigation

Understanding Medicaid Trusts 

A Medicaid Trust, often referred to as an Irrevocable Trust, is designed to help individuals qualify for Medicaid while preserving their assets for their heirs. 

When assets are placed in these types of trusts, they are no longer considered part of the individual's estate for Medicaid eligibility purposes. 

The trust also, at times, contains a limited power of appointment of another individual (called a trustee). 

Benefits of Medicaid Trusts 

The benefits of these types of trusts are: 

• Asset Protection 

• Estate Planning 

• Tax Advantages 

Common Issues Leading to Estate Litigation Involving Trusts 

• Lack of Capacity; Undue Influence, Fraud, or Duress of concerning the Principal 

• Disputes involving beneficiary 

• Trustee Mismanagement

• Withholding the Trust from Distribution 

• Improper Trust Formation 

The Mechanics of Estate Litigation 

There are certain proceedings that can be brought in Surrogate's Court in the County of the Trusts where Trusts can be challenged. 

These include: 

• Proceeding to Compel Production of a Trust pursuant to SCPA 2102 

• Proceeding to Compel Trust Accounting pursuant to SCPA 2205 

• Proceeding to Set Aside A Trust 

• Proceeding for Limited Letters and then to Conduct Turnover Proceeding pursuant to SCPA 2103 

Steps to be Undertaken to Prevent Estate Litigation 

• Identifying and Communicating Only with the Grantor 

• Discuss Family Matters with the Grantor 

• Proper Trust Drafting

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This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship. 

For more information on this and other topics, please contact Kevin via any of the channels listed below:

📧 kevin@kmckernan.com  | 📞 718-317-5007