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Follow on Google News | The Death of the “Solely for the Benefit Of” TrustSBO trusts in Michigan were not considered countable, and transfers to them did not result in a divestment. On August 20, 2014, this all changed - see how.
Sadly, on August 20, 2014, we experienced the passing of a legend. The Michigan Department of Human Services released a “policy clarification,” So where does this leave Michigan practitioners? At first, it left them scrambling. At the time the above referenced memo was released Medicaid applications were being prepared to be filed for the month, and the execution of many SBO trusts were already in process. These trusts have little to no ability to be dissolved after creation, and most had already been funded by the time the memo came out. What if the SBO trust has already been funded? In that case, one viable solution may be to use an immediate annuity compliant with the Deficit Reduction Act of 2005 – also referred to as a Medicaid Compliant Annuity (https://www.medicaidannuity.com/ What about future cases now that SBO trusts can’t be used? Using Medicaid Compliant Annuities is not a new spousal crisis Medicaid planning technique. Although, it might be to Michigan practitioners. In using an annuity, rather than transfer the spend-down amount to an SBO trust, it is instead transferred into a Medicaid Compliant Annuity owned by the community spouse. The current trend in community spouse planning has been to utilize a short-term Medicaid Compliant Annuity – less than 12 months, in order to avoid a potential payback to the state. However, it has always been the opinion of Krause Financial Services that this type of planning will lead to increased restrictions in community spouse planning (e.g. the NASMD letter (https://www.medicaidannuity.com/ What will happen to SBO trusts at annual re-certifications? Only time will tell. If the trust corpus is determined to be countable, the above referenced technique of having the SBO trust purchase a Medicaid Compliant Annuity with the community spouse being the annuitant may be the solution. End
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