Monthly Archives: September 2015

The Use of Trusts in Estate Planning

While we use trusts often in our estate planning and elder law practice, I sometimes take for granted that these concepts are foreign to many. So, here is a brief primer on Trusts:

What is a Trust?

A Trust is legal arrangement where one person/persons/institution (the “Trustee”) manages assets for the benefit of another (the “Beneficiary” or “Beneficiaries”). The person(s) who created the Trust may be referred to as the “Grantor(s)”, “Settlor(s)”, or “Trustor(s)”. Of course, this a very general definition!

How does this Trust come to be?

The Grantor (a.k.a. Settlor a.k.a. Trustor) creates the trust by putting the terms of the arrangement in a signed writing. We call this the “Trust Document” or “Declaration of Trust”. Jurisdictions vary on the exact requirements. Generally, the writing must name one or more Trustee(s) and one or more Beneficiary(ies).

What’s the point?

The goal often boils down to separating the management and control of trust assets from the enjoyment of them. For example, if my husband and I both passed away, I would want our only child to enjoy the benefit of our assets. However, I would need someone else to manage these assets for his benefit, because at 15 months old, I just don’t think he’s ready. So, I’ve set up a trust in my will where a Trustee would manage our assets for him until a certain age.

Are there other reasons to use trusts?

There are many! Some types of trusts provide creditor protection for the beneficiaries and prevent them from wasting trust assets, some make the administration of a deceased person’s assets simpler, some protect the beneficiary’s eligibility for government benefits like Medicaid, some provide federal gift and estate tax savings, and some make it easier for someone to manage and protect your assets if down the road, you’re unable to do so yourself. These are just a few of the many purposes that trust planning can serve.

What parameters are given to the Trustee(s)?

Some of the Trustee’s obligations and powers are specifically set out in the Trust document; some are bestowed by state law. General Trustee duties include:

  • Duty to maintain, control and distribute trust assets as provided in the trust document
  • Duty to follow terms of trust and state law
  • Duty of loyalty and impartiality to the beneficiary
  • Duty to act in the best interest of the beneficiary and avoid conflicts of interest

What should I do if I think a Trust would be useful for me?

Contact an attorney to explore how a trust could benefit you and your loved ones.

Image © razihusin – Fotolia.com

CAVEAT:  This web site and the information contained herein have been prepared for educational purposes only.  The information on this blog does not constitute legal advice, which would be dependent upon the specific circumstances of a particular case.  In addition, because the law can vary from state to state some information on this site may not be applicable to you.

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DIY Elder Law Planning: Just Don’t Do It

I love everything DIY (or Do-It-Yourself, for the uninitiated). Give me can of spray paint and a Pinterest DIY Board or blog post, and I’ll be entertained for hours. However, some tasks just don’t lend themselves to DIY. In terms of home repairs, electrical work comes to mind: as accomplished as I feel fixing up our home, it’s probably not worth violating building codes or burning down the house. Needless to say, my husband would not be pleased.

Unfortunately, I have a number of clients come see me when DIY long-term care planning goes awry. Even estate planning attorneys, who prepare wills, trusts, powers of attorney, etc., feel appropriately nervous ‘dabbling’ in areas such as Medicaid and VA Pension planning. It is so important to work with someone who has a solid understanding of the effect any care planning will have on a person’s eligibility for Veterans or Medicaid benefits, as well as the tax, legal, insurance, and practical implications.

Families rarely realize that their plans for an aging relative – which make perfect practical sense – could have a negative impact on the relative’s eligibility for government benefits down the road. Often, the problems are not highlighted until the person’s assets are running low and these benefits become increasingly important.

The bottom line? If you are doing any planning for the care of an elderly or disabled relative, especially, if such care involves the management and/or transfer of assets, consult a knowledgeable elder law attorney first. But if you want to spray paint some vintage furniture? Grab your can of spray paint and DIY-away!

Image © cobracz