Author Topic: Does a Revocable Trust "hide" money?  (Read 3172 times)

Lifeblood

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Does a Revocable Trust "hide" money?
« on: June 11, 2014, 09:00:04 PM »
A relative has a revocable living trust, a high-yield savings account and two properties in the name of the Trust, and a regular checking/savings account in her personal name. She intentionally keeps the balances in the regular accounts low, while keeping most excess funds in the high-yield account. It is her intention to leave as much as possible to her children (actual cash holdings are very low anyway and her children are living in the two houses and hope to stay there, so those cannot be easily liquidated). In the event of a major and unexpected medical expense, it is likely my relative would ask for financial help from the hospital. In this event, would funds/properties listed in the name of the Trust be shielded from the review process that would be undertaken by the hospital? My understanding is that the Trust is a separate entity, but I am bit confused by the fact that my relative's Social Security Number acts as the Tax Identification Number (TIN) for the Trust. Thus, there will be one tax return form at the end of the year which will need to report interest income from the Trust's savings account.

     

amha

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Re: Does a Revocable Trust "hide" money?
« Reply #1 on: June 11, 2014, 09:05:57 PM »
Short answer: no.

Somewhat longer answer: the trust IS a separate entity, but gets treated as equivalent to your relative for tax and most other purposes. (Like a single-owner LLC, if that analogy makes any sense.) If it were an irrevocable trust, or a trust with someone else as trustee, it'd be different, but since revocable living trusts with the grantor as the trustee are so common, they're typically considered identical to the grantor/trustee. Presumably the hospital doesn't draw a distinction, since many elderly well-off patients arrange their finances in this way.

Chiron

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Re: Does a Revocable Trust "hide" money?
« Reply #2 on: June 11, 2014, 09:13:38 PM »
Yes, revocable living trusts are usually used to avoid probate, not to "hide" assets, although some real estate investors use them for that purpose (usually ineffectively).  They don't shield your assets from creditors and it'd be dishonest (and potentially fraudulent) to claim that you don't own those assets anymore for purposes of applying for financial aid programs from hospitals, etc.

Lifeblood

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Re: Does a Revocable Trust "hide" money?
« Reply #3 on: June 11, 2014, 09:28:18 PM »
Thanks for these responses. You have confirmed what I was thinking! Now to break the news to my decidedly non-mustachian relative.

Nords

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Re: Does a Revocable Trust "hide" money?
« Reply #4 on: June 14, 2014, 09:06:34 PM »
In the event of a major and unexpected medical expense, it is likely my relative would ask for financial help from the hospital. In this event, would funds/properties listed in the name of the Trust be shielded from the review process that would be undertaken by the hospital?
Your relative may be confusing their revocable living trust with the features of an irrevocable charitable remainder trust.

If they donate all of their assets to the hospital as a charitable remainder trust, then I'm sure the hospital will be quite happy to offer all sorts of financial assistance...