It is important to understand the fact that there are many different types of trusts that can be used when you are planning your estate. A last will is not going to be the best choice for many people, and trusts are not strictly for very wealthy families.
People who are in possession of considerable wealth can use trusts to gain estate tax efficiency. There are estate taxes on large asset transfers. However, there are also trusts that are useful for “the rest of us.” Let’s look at some of them.
The Medicaid program can seem like something that would never be relevant to you if you have never been financially needy. However, this program does become quite important for many senior citizens, because it will pay for long-term care.
Most elders will need living assistance eventually, and Medicare does not pay for custodial care, which is the form of care you would receive in a nursing home or assisted living community.
Since Medicaid is intended for people with very limited financial resources, there is a $2000 limit on countable assets. To get within this limit, you could convey assets into an irrevocable Medicaid trust. You would not be able to access the principal, so it would not count against you if you were to apply for Medicaid.
If you need the income, you could continue to receive income that is earned by the trust before you apply for Medicaid coverage.
Effective Inheritance Management
You may be concerned about the money management capabilities of some of your heirs. Lump sum inheritances could be squandered quickly, and these family members could face hardships later on.
To account for this, you could utilize a revocable living trust. You can act as the trustee while you’re living, and you name a successor to handle the assets in the trust after you are gone. As a result, the resources would be managed by a steady hand that you empower. It would be possible to use a professional fiduciary like a trust company or the trust section of a bank.
In the trust declaration, you could instruct the trustee to distribute assets in a measured fashion over an extended period of time. Plus, the distributions would take place outside of the process of probate. This is a lengthy legal process that would enter the picture if you use a last will as your asset transfer vehicle.
There are also irrevocable spendthrift trusts that can provide added protections.
People with special needs often rely on Medicaid and Supplemental Security Income. An improvement in financial status can cause a loss of eligibility. You could use a supplemental needs trust to set aside assets to make a loved one more comfortable without impacting eligibility for these government benefits.
Contact Our Firm
If you would like to discuss your estate planning objectives with a licensed professional, contact us through the following link to set up a consultation: Smithtown Long Island Estate Planning Attorneys.