Most people associate estate planning with a simple will. They have heard of trusts, but they assume that trusts are usually unnecessary, and they are complicated and expensive to create.
In reality, there are many different types of trust, and they serve very distinct purposes. Let’s look at some of the reasons why you may want to use a trust instead of a will.
Special Needs Planning
There are over 60 million people in the United States that have disabilities, and a significant percentage of them rely on Medicaid for health insurance. Supplemental Security Income is another need-based program that provides a small amount of monthly cash to people with disabilities.
For those that receive these benefits, an improvement in financial status can cause a loss of eligibility. For a special needs person, a direct inheritance through the terms of a simple will could cause loss of those important benefits. A supplemental needs trust provides a solution to this problem by allowing the special needs person to receive an inheritance that is not owned by the person, but that can be used for his or her benefit without causing loss of government benefits.
The trustee that you name in the document could use the funds to make the beneficiary more comfortable in many different ways. As long as the trustee follows the rules, the special needs person will remain eligible for government benefits.
It can be disconcerting to leave a lump sum inheritance to a loved one that has no experience handling significant resources, or who has a proven history of poor money management.
Under these circumstances, a revocable living trust provides a solution. Under a revocable living trust, you serve as the trustee while you are alive, so you have total access to the assets in the trust. In the trust declaration, you would name your loved one as the beneficiary and another person as successor to serve as trustee after your passing.
The trust would become irrevocable after your death, and the spendthrift clause would protect the assets from the beneficiary’s creditors. You could leave instructions with regard to the way you want the assets to be distributed to the beneficiary. For example, you could allow for distributions of the earnings that are generated by income-producing assets in the trust. The beneficiary could also receive portions of the principal when they reach a certain age.
Nursing Home Asset Protection
Just over one third of seniors will eventually need nursing home care, and Medicare will not pay for it. Medicaid is the widely embraced solution, but you can’t qualify if you have significant assets in your own name.
If you convey resources into an irrevocable Medicaid trust, the principal will not count if you apply for coverage to pay for long-term care. In the meantime, you would be able to receive distributions of the trust’s earnings.
Access Our Free Estate Planning Worksheet
We have published numerous blog posts like this one so that you may learn more about the estate planning process, and we add new ones on a regular basis. In addition to the blog, there are other useful resources on the site, and one of them is our estate planning worksheet.
It has been carefully prepared to give you a more thorough understanding of the process, and it is being offered free of charge. To get your copy, visit our worksheet access page and follow the simple instructions.
Need Help Now?
At some point, you will learn enough to know that it is time for you to work with an attorney to put an estate plan in place. If that time is now, we are here to help.
As you can see, there are many different approaches, and we can help you devise a custom crafted estate plan that is ideal for you and your family.
You can set up an appointment at our office in Oklahoma City if you call us at 405-843-6100. The number for our Overland Park, Kansas location is 913-385-9400, and you can fill out our contact form if you would prefer to send us a message.