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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 2608
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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My Grandparents put their house in a trust. 6-7 years later

Customer Question

My Grandparents put their house in a trust. 6-7 years later they both went into a nursing home. My question is if a property is placed into a trust and the trustee rents the property out is the trustee obligated to report any income made on the rental to medicaid
Submitted: 11 months ago.
Category: Finance
Expert:  Mark Taylor replied 11 months ago.

Hi, my name is Mark. I will be happy to help you with your questions. What dead line did you miss?

Expert:  Mark Taylor replied 11 months ago.

Sorry, the previous comment was for another question. Please disregard. I am working on a response to your question. Please give me a few moments. Do you know what type of trust that the home was placed in?

Expert:  Mark Taylor replied 11 months ago.

Usually the trusts are designed as income only trusts. These means that the trustee would be required to submit the income to the donors (your grandparents).

Customer: replied 11 months ago.
Not sure what deadline you are asking about. I am asking the above question because I suspect that the trustee of the trust did not report this income to Medicaid and I am worried that the beneficiaries of the trust and/or the trustee could be held liable if in fact medicaid should have been told about the income made from a primary residence (in NY) in an irrevocable trust that was rented out after my grandparents went into the nursing home. I have been told that no they do not have to notify medicaid of the income because it is after the 5 year look back. I have also been told that yes they were supposed to notify Medicaid of the income. At this point I am just looking for the correct answer to this question.
Expert:  Mark Taylor replied 11 months ago.

The trust should have filed a tax return reporting the rental income. There will be expenses that would reduce the income (mortgage interest, property taxes, depreciation, repairs etc). So the entire amount of rental income is not income only the net amount is income. The net income should be reflected on the trust tax return and reported on the k-1's to your grandparents. Do you know if the trust filed a tax return?

Expert:  Mark Taylor replied 11 months ago.

What state do your grandparents reside?

Customer: replied 11 months ago.
Unfortunately I do not. The trustee refuses to giving anyone an accounting of the trust and the beneficiaries have asked on multiple occasions since my grandparents went into the home. They have both recently passed and the trustee still refuses. The trustee is also trying to exclude one of the beneficiaries from the trust now that the house has been sold.They resided in NY
Expert:  Mark Taylor replied 11 months ago.

I am sorry for your loss. How long did you grandparents own the home for?

Customer: replied 11 months ago.
50-60 years. They put it into a trust in November 2005. Went into the nursing home in 2011. My Grandfather passed in 2012 and my grandmother passed in 2015
Expert:  Mark Taylor replied 11 months ago.

Was the home rented the entire year? Do you know if there was a mortgage on the property?

Customer: replied 11 months ago.
There was no mortgage on the property and the house has been rented out yearly since 2011 for $1500/month. The trustee just sold the property a month ago.
Customer: replied 11 months ago.
It was rented out within a a few months of my grandparents going into the home. and has only stay vacant for very short periods of time since in between renters
Expert:  Mark Taylor replied 11 months ago.

So since they owned the property for a considerable amount of time there is little depreciation and no mortgage interest. So have property taxes and other expenses associated with the rental property. So based on your description it looks like there would have been a fair amount of rental income each year. This rental income above the exemption amount should have went towards paying for your grandparents care.

Customer: replied 11 months ago.
Is there anyway wording in the trust would allow the trustee to avoid reporting that income to my grandparents?
Expert:  Mark Taylor replied 11 months ago.

Medicaid trusts would be set up where the income would be reported to your grandparents. The trustee could have been reporting the income on the trust return and paying taxes there and retaining the funds in the trust. This would not be correct. It is concerning where the trustee refuses to provide any information on the accounting of the trust. Do you know if the rental income went into the trust?