Wills & Trusts
"Wills and trusts" are probably the first words that come to mind when you think of estate planning. What exactly do they do and which one is right for you?
It is essential that you speak with an experienced elder law attorney before beginning an estate plan. Elder law attorneys add a unique emphasis on providing for the long-term care needs of you and your beneficiaries. If you don’t include elder law provisions in your estate plan, you may not have an estate left after paying for long-term care or being pillaged by creditors and predators.
A will, or last will and testament, gives the probate court instructions for what to do with your estate after you pass away. It also tells the probate court who you want to be in charge of your estate. If you have assets that are titled solely on your name, even if you have a last will and testament, they can only be distributed and retitled to the ownership of someone else through the probate process. If you have minor children, your last will and testament can also tell the probate court who you want to take care of them as their guardian and conservator.
A trust is a document that gives instructions to everyone not only about what to do with your estate after you pass away, but also what to do if you should become incapacitated. There are many types of trusts. Some are revocable (changeable) and some are irrevocable and cannot be changed without appropriate provisions or court approval.
Both revocable and irrevocable trusts consist of some key components:
- Grantor - The people establishing the trust.
- Trustees - The people in charge of following the instructions.
- Beneficiaries - The people who benefit from the assets in the trust.
Revocable Living Trusts
Revocable living trusts are the most common trusts used in estate planning. They can be easily changed, amended or revoked as long as the grantor(s) is alive and well. These trusts can help avoid probate and help protect beneficiaries from creditors and predators.
Oftentimes the grantor is also the trustee and beneficiary as long as they are alive and well. If the grantor should become incapacitated or pass away and can no longer act as the trustee, the trust usually becomes irrevocable. A successor trustee is named in the trust to take over caring for the grantor and/or their estate according to the terms of the trust. All of the grantor's assets owned by the trust can be distributed and retitled without the need for probate court.
Married couples may choose joint or individual trusts depending on the complexity of the plan required to meet their goals. When couples choose individual trusts, there are different circumstances to consider when choosing initial and successor trustees. These circumstances may include blended families, as well as financial concerns unique to different situations.
One of the best features of a revocable living trust, aside from avoiding probate, is that no special tax considerations are required unless the trust becomes irrevocable.
Consulting with an experienced elder law attorney can help you decide which options will work best for your personal situation.
Irrevocable trusts help protect assets from potential lawsuits, predators and creditors. They can also be a useful tool in planning for long term care needs. Unlike revocable trusts, the grantors are usually not the trustee. They also may not be the beneficiaries, or only in a limited capacity in some circumstances. Changing or revoking these trusts usually requires the consent of all potential beneficiaries and may require court approval.
Before taxable estate limits were increased significantly, these trusts were often used to help protect the beneficiaries of larger estates from paying a significant portion of their inheritance to taxes. Estate tax laws change often, so it’s important to keep an eye on current legislation to determine if new laws may affect you or your family.
Many business owners who may be subject to potential lawsuits can also benefit from irrevocable trusts. In addition to providing asset protection, they can be used to establish a business succession plan. Making a plan for who is in charge and how you want your business to be passed down when you are ready to step away is invaluable. Especially if something happens and leaving your business is sudden and unexpected.
How can an irrevocable trust be used for long-term care planning? Medicare only covers a certain number of days for long-term care costs in a skilled nursing facility. After that time is up, if long-term care is still needed, seniors who don’t qualify for Medicaid must cover the additional costs either out of pocket or with a long-term care insurance policy. Properly executing a Medicaid Asset Protection Trust at least 5 years before needing long-term care, can help avoid spending a life savings on long-term care.
Special Needs Trusts
A Special Needs Trust, sometimes also referred to as a Supplemental Needs Trust, provides for the needs of a person with a disability by complementing rather than replacing government benefits. The person with the disability can benefit from the funds while maintaining eligibility for government benefits.
The trust can pay for services and equipment that Medicaid would not cover, such as the purchase of a home, special wheelchairs, and handicap-accessible vans. The trust can also be used to enrich the beneficiary’s life by providing for vacations, a personal attendant, and recreational and cultural experiences.
The trustee of a Special Needs Trust has very specific fiduciary duties to the beneficiary. The trustee must manage the assets properly to see that the assets are used for the benefit of the disabled person and that his or her access to public benefits is not hindered by distributions from the trust.
Which Option is Right for You?
We can help guide you through which planning documents will help you achieve your goals. We can also provide counseling on choosing trustees and successor trustees to safeguard your family, your estate and your legacy.
Call us or fill out the form on this page today to schedule a free consultation.