July 25, 2023 • Volume 4 Issue 158

You should not believe everything you read but you should LISTEN TO LAWRENCE…read on:

CLIENT QUESTION:

I just read an article in Kiplingers (https://www.kiplinger.com/retirement/irs-changed-rules-on-your-childrens-inheritance) about the new Revenue Ruling 2023-2 that affects irrevocable trusts. The article seems to say that my children will now have to pay capital gains tax on the sale of my house after my death. Is this true?

MY RESPONSE:

NOOOOOOOOOO! It is not true.

Several clients called the office here in panic after reading this irresponsible article. The crux of the article was that irrevocable Medicaid trusts might cause you a loss of the step up in tax basis at death, causing your children to pay capital gains tax upon the later sale of trust assets (like an appreciated house or stock).   While this might be true of some irrevocable trusts, it is certainly not true with irrevocable Medicaid trusts unless your attorney is a complete moron.

The article correctly states that if the trust assets are included in your estate for estate tax purposes, then you do get the step up. The problem with the article is that it infers that assets in a Medicaid trust would not be included in your estate for estate tax purposes. On the contrary, almost every Medicaid trust I have ever prepared, and almost every Medicaid trust I have ever seen, has the proper language in it to have the assets includable in your estate for estate tax purposes.  Clearly, the retained right to live in the house and the retained right to change trust beneficiaries are two trust powers that result in the house and other trust assets being includable in your estate for estate tax purposes. And, by the way, causing these assets to be includable in your estate for estate tax purposes does not actually cause an estate tax if your estate is below the tax threshold of about $6.5 million in New York.

So, just LISTEN TO LAWRENCE! 😊

I hope this helps! Please forward this email to your friends and relatives to share these informative answers to some very commonly asked questions.

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As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.

Let’s stay connected.

Stay safe! 

Click on the video below to Listen to Lawrence explain Irrevocable Medicaid trusts

in even more detail!

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Enjoy the book and even if you've already completed your planning,

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