The many benefits of creating trusts include avoiding probate, protecting assets, and providing for loved ones with special needs. Trusts also protect your dignity and grace by allowing a smooth transition of the management of your assets and your care without publicity and according to your own rules and wishes.
If you do not have a trust, right now you are going through life with all your assets on your back. As long as you are alive and healthy, that works okay. But what happens when you are no longer vertical- either disabled or deceased. All your things are scattered and someone needs to clean up the mess.
A trust is similar to a little red wagon. You can build the wagon however you like and make up the rules for what happens to the things in it. Then when something happens to you, your things stay in the wagon and do not scatter. A successor trustee can pick up the handle of the wagon and continue to follow your wishes regarding your stuff. Your decisions will be followed about how your assets are invested, how they will be spent, for whom and when.
There are many types of trusts that are created to meet the needs of the individuals creating them. At the Midwest Elder Law Firm, we primarily focus on three main categories of trusts: Asset Protection Trusts, Probate Avoidance Trusts, and Special Needs Trusts. However, we can work with you to create any type of trusts to meet your individualized needs.
To learn more, contact us today at 573-445-4755 or send us a message to reserve a seat at a complimentary workshop.
Asset protection trusts
There are several reasons for an asset protection trust, but for seniors, the primary reason is to protect your assets from the devastating costs of long term care.
Once the trust is properly created, funded, and administered:
- The income from the assets held in it can still be used by you;
- You can still live in the home owned by the trust;
- You can still manage the investments of the assets held in the trust; and
- You can use the principal for any purpose other than for your direct benefit. For example, the assets in the trust can be used to pay for a grandkid’s wedding or education.
- The assets placed in the trust will be protected from the cost of long term care (after a 60-month look-back period).
If you are interested in protecting your assets and preserving your legacy, act soon because this kind of trust must be created and funded more than five years before those assets are protected from the cost of nursing home care.
Probate Avoidance trusts
The most common goal many people have when creating a trust is to avoid “probate”. This can be done through any trust, but the most prevalent type is the Revocable Living Trust. For as long as you are alive and well, assets can be put in the trust and taken out of the trust as you see fit.
The true benefit of this trust is discovered when you become disabled or deceased. Then, the administration and distribution of your assets can be handled at a fraction of the price of probate, and your family can handle everything in their attorney’s office or their living room, rather than the courtroom.
The Revocable Living Trust also can provide asset protection for your spouse and beneficiaries after your death. It allows you to leave your legacy to whom you want, when you want, and how you want.
Special Needs Trusts
Many disabled individuals and their families rely on government programs (e.g., SSI, Medicaid, etc.) to meet the high cost of care that is required. Those individuals would lose this essential assistance if they have non-exempt resources of $1,000.00 or more.
For this reason, parents of disabled children cannot leave their disabled children any inheritance, or gift them any cash without jeopardizing the assistance they so badly need. When planning how to help provide for a disabled family member without jeopardizing their federal and state aid, many parents would disinherit their disabled child, instead leaving the inheritance to someone else who agreed to “take care” of them. This strategy worked okay sometimes, but was vulnerable to many threats.
What if the caregiver changed his or her mind after the parent was gone, and didn’t use the assets to provide the care to which they agreed? Even with the best of intentions, the assets were not protected from the caregivers’ death, divorce, disability, lawsuits, bankruptcy, etc. Before 1993, the families of disabled persons did not really have a choice though.
In 1993, Congress enacted a law that would provide a much better alternative. A new kind of trust where money could be left to enhance the lives of individuals with disabilities without causing them to lose the essential benefits upon which they rely. This is a Special Needs Trust.
A Special Needs Trust allows money to be preserved for the benefit of a disabled person without affecting his or her government benefits. Instead of using the funds left to a disabled individual to pay for his or her medical expenses and basic living expenses, the funds in a Special Needs Trust can be used to enhance the quality of your loved one’s life AND to purchase items and services that are not covered by the benefits received. Examples include computers and other electronics, nicer clothing and travel expenses (even the cost of taking a personal care attendant if one is necessary). Did you know that Medicaid does not pay for dental care, prosthetics, a second pair of glasses, power wheel chairs, a hoyer lift, or other mobility and independence-assisting devices? Funds in a Special Needs Trust can be used to supplement the benefits for those items too.
There is not one Special Needs Trust that fits all cases. Each one must consider the circumstances of the disabled beneficiary, including the nature of his or her disability and limitations, the family dynamics, and the source of funds to be protected in the trust. Once the trust is funded, the Trustee needs guidance to administer the Special Needs Trust to ensure that it will work to provide for the beneficiary AND to protect the beneficiary’s benefits. For the Special Needs Trust to be most effective, it takes a team of an attorney (to draft the documents and guide the administration), an accountant (to ensure the necessary reports are filed), and a financial advisor (to ensure the funds are invested in such a way to provide the best benefit to meet the beneficiary’s needs.)
If you have a loved one who is disabled and wish to provide for the best future possible for him or her, contact Midwest Elder Law Firm today at (573) 445-4755 or send us a message, and let us help.
Trust administration is similar to Probate in some ways: You still have to pay the deceased’s bills and distribute the estate according to the deceased’s instructions. However, the administration can be done at a fraction of the cost and in the attorney’s office or the family’s living room, rather than the courtroom.
An estate planning attorney helps the trustee ensure the Trust’s rules are followed; defend claims against the Trust; comply with Federal and State laws; send proper notice and accountings to beneficiaries; and diminish chances of family squabbles. The attorney can also work with your accountant and financial planner to save significant funds by choosing the proper tax elections, the timing of sales, and the timing and manner of making distributions.
The best trust in the world doesn’t work if it is not administered correctly.
If you are placed in the position of administrator of an estate, either through Trust, Will, or Neither
Contact Midwest Elder Law Firm to help your family through the administration process with grace , dignity, and respect.
Contact them today at 573-445-4755 or send us a message.
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