There is a popular misconception that is embraced about trusts. A lot of people think that you would never consider using a trust unless you are a multimillionaire with a complex financial empire.
In reality, there are a number of different types of trusts, and many of them are perfectly useful for people that do not reside in the financial stratosphere. And of course, there are trusts that are used by people that have achieved a great deal of financial success.
We are going to look at three objectives that can be satisfied by the utilization of a trust in this post, and we will follow up with a second installment because there are so many possibilities.
Nursing Home Asset Protection
The United States Department of Health and Human Services tells us that 35 percent of American senior citizens will eventually reside in nursing homes. You can expect to pay somewhere in the vicinity of $150,000 for a year in a nursing home in Connecticut.
Medicare does not pay for the custodial care that nursing homes provide, so you have to look elsewhere for a solution.
Medicaid is the answer for most people, because this jointly administered federal/state government health insurance program will cover a stay in a nursing home. Since it is a need-based program, you cannot qualify if you have more than $1600 in your own name.
As a response, you could convey assets into an income-only Medicaid trust. This would be an irrevocable trust, so you would not be able to touch the principal or act as the trustee. However, as the name would indicate, you could receive income that is generated by assets in the trust.
If and when you apply for Medicaid, the assets would not count as long as you fund the trust at least five years before you submit your application.
You may not feel comfortable leaving a significant inheritance with no strings attached to someone with self-destructive proclivities, or a loved one that has not yet achieved their full potential. A situation like this can be addressed through the utilization of an incentive trust.
When you establish the trust, you empower a trustee to act as the administrator. This can be someone that you know personally, or you can use a professional fiduciary like a trust company or the trust department of a bank.
In the trust agreement, you establish conditions that must be met to trigger distributions from the trust to the beneficiary. For example, you could require someone with a substance abuse problem to undergo regular testing and treatment if it becomes necessary.
Another example would be a dollar for dollar match of income that is earned by a beneficiary on the job. The nature of the incentives would be up to you, but you do have to weigh the potential for resentment that can do a different type of damage.
Many elders experience loneliness late in their lives when they lose their spouses and other people that are close to them. A dog or a cat can cannot replace these human relationships, but a pet can provide much needed companionship, and there are other benefits.
Seniors with dogs get more exercise, and they feel a renewed sense of purpose. Canine companions can also provide an added layer of home security, and this would even apply to small dogs that respond to strange noises outside the door.
Without question, pet ownership can enhance the lives of seniors, but longevity is going to be a source of concern. This obstacle can be conquered through the utilization of a pet trust.
If you establish a pet trust, the trustee would follow your instructions with regard to the way you want the pet to be cared for after your passing. It should be noted that the trustee would not necessarily have to provide the care; they would use assets in the trust to facilitate the care.
After the passing of the pet, a successor trustee that you name the trust declaration would assume ownership of assets that remain the trust.
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As you can see, there are many tools in the estate planning toolkit, and there are different approaches that can be taken. We can gain an understanding of your objectives and help you create a custom crafted plan that ideally suits your needs.
If you are ready to get started, you can send us a message to request a consultation appointment, and we can be reached by phone at 860-548-1000.