Many people come into our office to speak with an Albany living trust attorney, and we find that they often ask a lot of the same questions. With this in mind, we thought that it would be a good idea to create a hypothetical question-and-answer session and make it available here on our blog. After you go through it, if you would like to experience the real thing, feel free to send us a message to request a consultation appointment.
Living trusts are only for wealthy people, right?
This is one of the most common misconceptions in the field of estate planning. There are trusts that are used by high net worth individuals that have concerns about estate taxes. There is a federal estate tax that everyone must be aware of, and here in New York, we have a state-level estate tax as well.
However, these are irrevocable trusts that are somewhat complex. A living trust is something entirely different, because it is revocable. You do not lose any control, because you can dissolve the trust and take back direct personal possession of the assets if you ever choose to do so.
These trusts can be useful for a wide range of different people. You don’t necessarily have to be a millionaire or a multimillionaire to realize the benefits.
What are these benefits?
If you were to use a last will, it would be admitted to probate, and the Surrogate’s Court would supervise the administration of the estate. It provides certain protections for creditors, but probate is not necessarily a positive thing for the rightful inheritors.
The process will take about eight or nine months to run its course at minimum, and no inheritances can be distributed while the estate is being probated by the court. It is a public proceeding, so anyone that is interested can access probate records to find out how you decided to distribute your resources.
Lastly, there are a number of expenses that must be paid during probate. This money is essentially coming out of the pockets of the people that are named in the last will.
Assets in a living trust can be distributed outside of probate. Another benefit is the ability to include spendthrift protections. If you have concerns about the money management capabilities of the beneficiary, you could instruct the trustee to provide limited, incremental distributions over an extended period of time.
An added advantage is the ability to consolidate all of your assets in one place. The trustee would have easy, direct access to the assets that are the property of the trust.
Would Medicaid count the trust’s assets if I was to apply for coverage to pay for long-term care?
Since you are retaining incidents of ownership, the assets would be counted if you were to seek Medicaid eligibility. However, there is a solution in the form of an irrevocable, income-only Medicaid trust. You could continue to earn income from the trust’s earnings until and unless you apply for Medicaid coverage, but you would not be able to touch the principal. Contact us if you would like to learn more about protecting your assets from Long Term Care and Nursing Home Costs by creating an irrevocable Medicaid trust.
When you apply for Medicaid, the assets in the trust would not be counted. Under Medicaid rules, you have to contribute almost all of your income to defray the cost of the care that you are receiving. At that point, you would not be able to continue to receive income that is generated by the trust.
What happens to assets that I neglected to convey into the trust?
There is a simple solution that can be part of your estate plan. To account for assets that you never sign over to the trust, you could execute a pour-over will. This would allow the living trust to assume ownership of the assets after your passing.
Download Our Free Estate Planning Worksheet!
If you would like to tap into a fantastic resource that was created by an Albany living trust attorney, download our estate planning worksheet. It is being offered free of charge at the present time, you can visit this page and follow the simple instructions to obtain access to your copy.