Irrevocable Trusts Do's and Don'ts

Do's

• Do make all transfers to your trust, as advised by the elder law firm, in a timely manner.
• Do take dividends and income on trust assets on at least a quarterly basis (if not, they are considered additions to principal and create a new look-back on the money not taken every year).
• Do contact the elder law firm when you wish to make a gift from the trust to any of your beneficiaries.
• Do contact the elder law firm when a Grantor needs Medicaid benefits or dies.
• Do contact the elder law firm when personal or financial circumstances change significantly.
• Do contact the elder law firm if you wish to change trustees or undo the trust.
• Do provide your homeowner’s insurance company with the “letter of instruction”, including a copy of the trust for real property transferred to the trust, to add the trustees as “additional insureds” (supplied by the law firm).
• Do provide your CPA or tax preparer with the “letter of instruction” regarding the trust tax return (supplied by the law firm).
• Do choose your trustee carefully to avoid the expense (and unpleasantness) of changing the trustee.
• Do contact the elder law firm if you want to refinance, take a reverse mortgage or take out a home equity line of credit (“HELOC”) on real property in the trust.

Don'ts

• Don’t use trust assets to pay telephone or utility bills.
• Don’t use trust assets to pay personal expenses.
• Don’t use trust assets to purchase an automobile (since all the assets in the trust will be exposed to liability if there is a car accident).
• Don’t take principal or capital gains from trust assets.
• Don’t transfer IRA’s or 401(k)’s to the trust.
• Don’t allow beneficiaries to return to the trust or the Grantor any gifts made from trust assets.
• Don’t make additional transfers to the trust in the future without advising the elder law estate planning firm.
• Don’t use trust assets for repairs and improvements on Grantor’s residence (permitted for rental property).
• Don’t use trust assets for payment of real estate taxes and homeowner’s insurance on Grantor’s residence (permitted for rental property).

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