15 Apr Can I use money in an irrevocable trust created in N.Y.?

Q. We have an irrevocable trust done in 2015 in New York. Our house was in it. The trustee is my son, who has Down Syndrome and is on Medicaid. We have since moved to New Jersey. We sold the house and the money is in the trust. Then we bought a house in New Jersey. Can we use the trust money to pay for it?
— Unsure

A. The details here are important.

We can’t tell you, without seeing the terms of the trust and the specifics of your situation exactly how this would work for you.

But let’s talk generally.

Trustees of a trust — absent a restriction in the trust document — may buy and sell real property and may move from one state to another state, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

“If your son is receiving government assistance and will be inheriting property from you, such inheritance should be in the form of a third-party special needs trust which will supplement such government assistance and not supplant such assistance,” she said.

Distributions from such trusts may reduce assistance but should not disqualify the recipient, Romania said.

“First-party funded special needs trusts where the trust is funded with the assets or funds of the beneficiary also protect government assistance during the beneficiary’s lifetime but upon death, Medicaid will require reimbursement,” she said.

When a home is owned by a trust and used by both the beneficiary who is receiving government assistance as well other family members, particular attention needs to be paid as to the manner and proportion of payments with respect to the upkeep of the home in order that the beneficiary is not disqualified from assistance, she said.

“The irrevocable trust you had prepared in New York should be reviewed by a New Jersey attorney specializing in elder law or Medicaid planning and counseling sought as to the manner in which the trust is maintained and distributions made,” she said.

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This story was originally published in April 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.