When you are looking at protecting your assets from the rising cost of long-term care, you probably have many questions about irrevocable asset protection trusts. There are many ways you can protect your family’s wealth including a Medicaid defective grantor trust for income tax purposes. Learn more about this type of trust here in this video.

If you structure your trust to be a Medicaid intentionally defective grantor trust, the grantor will be responsible for all items of income, credits, and deductions on the trust earnings. While a federal income tax return will have to be filed annually for the trust, it will merely state that the grantor will be taxed and not the trust. The benefit of having the grantor responsible for paying the tax on trust earnings is that the tax will be reduced as a result of using the grantor’s income tax bracket, which is likely lower than the trust. Additionally, we can keep taxes down by deducting the grantor’s medical care costs. This way, the trust assets will grow and you will save on federal income taxes.

To learn more about structuring your trust and developing an elder law and estate plan, contact attorney Doug Kaune in Pennsylvania at Unruh, Turner, Burke & Frees at 610.933.8069 or online at