If you were to get together with an old college friend that became an estate planning lawyer, what questions would you have about the planning process? You would definitely come away with a renewed understanding, and we will share a fictional conversation of this nature in this post.
Why would you use a trust instead of a will?
There are a number of specific objectives that can be addressed through the utilization of some type of trust. For example, high net worth individuals that are exposed to the estate tax use certain types of irrevocable trusts to mitigate the damage.
You could also use a trust for Medicaid planning purposes. This program will pay for long-term care when Medicare will not cover a stay in a nursing home and there are no remaining assets.
Assets that are held by an irrevocable trust would not count if you apply for Medicaid as long as you fund the trust at least five years before you seek eligibility. In the meantime, you could accept distributions of the trust’s earnings, and this is a key factor.
Even if you do not have any pointed objective in mind, you may want to use a living trust instead of a simple will to avoid probate. This is a costly and time-consuming legal process that is a public proceeding, so the records are available to anyone that wants to access them.
Distributions through the terms of a living trust are not subject to probate, and this is just one of the benefits.
How do you prepare for incapacity and other end-of-life possibilities?
Every estate plan should include an incapacity component. If you have a living trust, you would act as the trustee while you are alive and well, and you can name a disability trustee to administer the trust if you become incapacitated.
To name someone to manage property that is not in a trust, you can empower an agent or attorney-in-fact in a durable power of attorney for property.
Advance directives for health care should also be part of your incapacity plan. A living will is used to record your life support preferences, and you can add a power of attorney for health care to name a medical decision-maker and express your wishes regarding organ donation and life support.
A provision in the Health Insurance Portability and Accountability Act that was enacted in 1996 prevents doctors from releasing medical information to anyone other than the patient. You should include a HIPAA release form to give your health care representative full access.
Who can act as a living trust trustee?
Any mentally competent adult that is willing to assume the role can technically act as the trustee. The beneficiary of a living trust can actually serve as the trustee, and in some instances, this will make sense.
If this is not the right course of action, and you do not know anyone personally that has the financial acumen and the time to administer the trust, there is another option. Trust companies and the trust departments of banks provide trustee services for a fee.
When the trust is well-funded and it is going to remain active for an extended period of time, a professional fiduciary can be the right choice. The assets will be managed effectively, there would be no longevity concerns, and there would be inherent organizational oversight.
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We enjoy getting out into the community to interact with our neighbors at the free seminars that we offer on an ongoing basis. This is a great way to make a real-life connection with an attorney, and you will learn a lot if you join us.
You can see the dates if you visit our seminar page, and we ask that you register in advance so we can reserve your spot.
Need Help Now?
Our doors are open if you are ready to work with a Naperville or East Aurora, IL estate planning lawyer to put a plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 630-568-8611.