Are Assisted Living Facility Payments by a Trust for a Beneficiary Deductible?

[trust812]

My late father’s Trust is paying for his partner’s assisted living. She is one of the Beneficiaries of the Trust. Are these expenses deductible by the Trust? Thanks!

[M-MTax]

The payments would not be deductions for the trust as medical expenses but would be deductible (to the extent of DNI), or includible, as an income distribution deduction when distributed to the beneficiary.

[trust812]

So  last year and currently the Trust is paying the assisted living directly from corpus. No K-1 was issued to this Beneficiary for the 2024 tax year. The Beneficiary has very little income, I think about $10,000 per year from Social Security. Next year the corpus is going to run out so the assisted living facility will have to be paid from her 25% portion of the Trust Inherited IRA. My understanding, and tell me if I am wrong, if next year I continue to pay the assisted living facility directly for her benefit from the Inherited IRA it would get taxed at the 37% tax rate because the money stayed in the Trust since it was never given to her via a K-1? However if next year I give her Power of Attorney, let’s say as an example $5,000 per month from the IRA for assisted living ($60,000 for the 2026 tax year) are you saying that I can issue her a K-1 for the IRA distribution in 2026 and her Power of Attorney can deduct the assisted living facility cost from her IRA income?  Am I correct to assume that for 2024 there was no deduction for the assisted living because it was being paid from corpus and the Trust had no income for this Beneficiary’s share? A total of $105,000 in income was distributed in 2024 from the inherited IRA, $35,000 each, to the other 3 Beneficiaries and K-1’s were issued. Thanks!

[M-MTax]

Her medical expenses are simply not expenses that the trust can deduct from the trust's income.

If proceeds are distributed from the trust to her (or through an intermediary), then she could possibly deduct her medical expenses on her personal income tax return (i.e., her 1040).

[trust812]

That’s what I thought! But I think that the medical deduction would have to be above the 7.5% threshold on her 1040 and her Power of Attorney probably couldn’t deduct the monthly “rent” for her assisted living facility.  Her son is her Power of Attorney and would have to keep detailed records of her medical expenses. He has a business and unfortunately is not overly involved in her life. It seems like since my father passed away I have done most of the work in this regard. Heck, one of my father’s joint checking accounts with her outside the Trust got locked out when my father passed away and her son has yet to get it unlocked. I am powerless because she was the joint owner with my father and it has nothing to do with the Trust.  

[M-MTax]

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@trust812 wrote:

.....But I think that the medical deduction would have to be above the 7.5% threshold...

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Yes, that's definitely an issue. 

[trust812]

Since my father passed away 5 months  ago like I said I have been using most of the cash in a bank account to pay for the assisted living facility but like I said it will run out next year. My father also has a house which I am trying to sell but the real estate market is very bad. If it doesn’t sell soon I will rent it out. Luckily the mortgage is paid off. I was hoping it would sell fast so that I could use 25% of the proceeds for the assisted living facility living but if it doesn’t and the cash runs out I will have no choice but to tap into the money in the inherited IRA. I explained to her son who is the power of attorney that if I start drawing on the IRA to pay for assisted living it will be taxed at the high Trust rate of 37%. I also explained to him that it would be better to give her (him) the money and have him pay the assisted living and the money will last longer at her much lower tax rate. I hope it sinks in and he understands why I would do it this way.