Making Changes in a Trust | Does Making Changes to a Castle or Legacy Trust Restart the 5-Year Clock?

Making changes in a trust. Does making changes to a Castle or Legacy Trust restart the 5-year clock? Does selling my house inside a Castle Trust restart the 5-year clock?

Atty. Chris Berry, answers those questions in this episode of Daily Wisdom.

Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.

Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.

Castle Wealth Group helps families with their legal, financial, and tax planning for their retirement and legacy.

With the use of legal structures like revocable living trusts, Castle Trusts (asset protection trusts), Chris Berry and Castle Wealth Group can help your family plan, protect, and preserve what is important through their Retirement and Legacy Blueprint Process.


For more info visit:


Episode Transcript

Types of Trust

In reality, we have two main types of trusts. We have a revocable living trust, and what a revocable living trust does is two things. And it does these two things very well, and it’s a good trust. One, is it avoids probate, assuming it’s funded properly. So most people want to avoid probate because it’s core process and time consuming, and it’s messy on the back end. And then two, what a revocable living trust does is that it can control that distribution. So you can control where your assets go at the end of the day, so it can control the distribution. For example, if you wanted to build in this legacy inheritance trust that we talked about, you can do that inside of a revocable living trust, so that’s pretty powerful. Then we have a second type of trust called a Castle Trust, and what a Castle Trust is it avoid probate, so that’s important. Most people that’s kind of the starting point for their estate plan.


Asset Protection

Two, we can control the distribution, so decide how we leave things to our beneficiaries, and we can either leave it outright to them, or it can be held in trust for their benefit. Again, protecting against divorces, lawsuits, creditor action, bankruptcy, etc. And then three, it builds an asset protection, and this is the big one. This is what a revocable living trust does not. And when we’re talking about asset protection, we’re talking about lawsuits. So immediately, whatever you move into the trust is protected from creditors, bankruptcies. You get in a car accident with the changes in auto insurance law. You’re a business owner, whatever’s inside of the trust would be protected.


Longterm Care

And then the big thing is it protects against the devastating cost of longterm care, and really what we’re talking about here is nursing home costs. A nursing home right now costs about $8 to about $14 plus thousand dollars per month, and the average stay in a nursing home right now is two and a half years. And current statistics say one out of two individuals will need nursing home costs, so you do the math. That’s a big concern for a lot of my clients, especially married couples. And with that, we have a governmental program that will help pay for nursing home care, and it’s called Medicaid. Now a lot of people think if you’re on Medicaid, you’re in some rundown nursing home. That’s not the case. I mean, any nursing home that accepts Medicare also typically accepts Medicaid. But if you were to try to call up a nice nursing home and say, hey, I need a nursing home bed for my loved one or a Medicaid bed, they’re going to say, oh I’m sorry. We don’t have any Medicaid beds available. But here’s the thing. You private pay for a couple months to get into that nice nursing home, then you can flip over and have Medicaid pay that base level of care. It’s kind of like back when you could travel. So if you are flying to California, you might buy a ticket to California and it’s $700. Well, the person sitting next to you in the same exact seat, maybe it’s first class, just like you, or coach or whatever it may be. Same exact level of service. They might have bought their ticket for $99 just based on where they bought it or the timing, that type of thing.


Medicaid With a Five Year Look Back Period

So they’re both getting the same level of service, both going to the same place, but you’re paying very different things. Similar with Medicaid is that we can have Medicaid pay that base level of care, and then with say a Castle Trust, we move the assets into the Castle Trust. We make it five years, then everything inside of the trust would be protected from that nursing home or Medicaid spend down. So now you could have Medicaid pay that base level of care, and then you’d have a pot of resource available, to pay for additional services to improve your quality of life. Or if you’re a married couple and one spouse needs longterm care, that healthy spouse isn’t going to be completely impoverished having to pay for that care. Now, Medicaid has a five year look back period, meaning Medicaid is going to look back five years to see if you moved any money around and if you have, they’re going to penalize. So again, what the Castle Trust does is as soon as we move the assets into the trust, it starts that five-year clock. Where now we wave a green flag to say that we started that race, and then once we make it five years, everything inside of that trust is protected from that nursing home or Medicaid spend down. And so the question is, and it was really a two-fold question. So the first question is with the Castle Trust, because you can make changes to it. You can change beneficiaries and that type of thing. If you were to make a change to the trust, does it restart that five-year clock? And the answer to that is no. Just because you make a change to the trust that does not restart the five-year clock.


Making Changes in a Trust

And then a follow-up question, and this is one that I get a lot is that if I were to sell my house from that Castle Trust, and let’s say downsize to a condo, does that restart the clock? And the answer to that is no, because all you’re doing is you’re changing the nature of the assets in the trust. For example, if you had $500,000 of cash in the trust, and then you bought a condo, everything’s remaining in the trust, so it remains protected. If you had $500,000 of checking, savings, and now you want to go to a mutual fund, all of that remains in the trust and it remains protected. So again, if you were to sell your property, as long as everything remains in the trust, the proceeds of sale will come back to the trust. Doesn’t touch you individually, then everything would remain protected in the trust, and it would not restart that five-year clock. I have a lot of clients that they downsize or they sell, they move into independent living or assisted living, and the proceeds of that sale remain protected inside of the trust. So yes, you can sell the house from the trust.



Castle Wealth Group Legal in Media

Send Us a Message