Drafting Trust using template, altering it to fit the facts and medicaid planning strategies relevant to the case

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Arthur and Alicia Anderson come to your office in Camden, New Jersey, for estate planning. The facts relevant to their family are as follows:

Arthur is 67 years old and Alicia is 66.

The couple have two children: Bailey and Bruno. Both children are in their 30s and have spouses and children of their own.

Bruno’s second child, Kelsie, is 7 years old and suffers from severe mental disorders that prevent her from interacting appropriately with children her age. She currently attends a private school for disabled children and is being treated for her disorders. It is hoped that she will recover and be able to live a normal adult life, but there is no guarantee of this. Government assistance, including the Medicaid Waiver Program, greatly helps pay for Kelsie’s care. Whatever happens, they want to make sure that Kayla does not lose her eligibility for government assistance at any time in the future.

Arthur and Alicia trust both Bailey and Bruno. They want them to serve as trustees of any trust that you will draft for them. However, they also think that a third person should also be a trustee to make sure that there is a third person to mediate any potential dispute between the children. Both clients think that Alicia’s brother, Albert Anderson, would be suited to this task. Since Albert is 68 years old and so may not be able to assist forever, they also want Arthur’s niece, Shelby Lake, as the backup co-trustee.

The primary purpose of their visit is to ensure that they become eligible for Medicaid assistance as soon as possible. The clients realize that, while they are now comparatively young, they may reach a time that they will need long term care Medicaid assistance and they do not want their assets to be depleted paying for such care. They want their assets preserved for their children and grandchildren.

Arthur and Alicia own the following assets:

A single family residence in Trenton, New Jersey. They purchased the residence in 1983 for $165,000. It now has an estimated fair market value of $700,000. They have no immediate plans to sell the house, but in the long term they are considering selling and moving to a warmer climate.

Brokerage accounts that include a portfolio of stocks, bonds, and cash worth approximately $400,000.

Individual retirement accounts (one owned by each spouse), each worth about $125,000.

A small checking account that they use for day-to-day expenses.

Of these, they want to transfer the first two to the trust. They do not want to withdraw (and thus be taxed on) their retirement account assets and so they cannot be placed into the trust.

Although the primary purpose of the trust should be for Medicaid planning purposes, it is also worthwhile to draft the trust in a manner that limits or eliminates the imposition of the New Jersey state estate tax (which is assessed on taxable estates above $675,000). You should also take into account capital gains tax implications in the event that the house and/or stocks are sold during the clients’ lifetimes or after their deaths.

Please draft a trust, using the template included, for the Anderson couple. Please try to keep all relevant Medicaid and benefits eligibility requirements in mind, along with all relevant tax consequences of the trust. The trust template included, but you must alter it to fit the facts and strategies relevant to our case. Please also omit boilerplate provisions that have no direct impact on the issues discussed above from your draft.


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