The elderly are highly vulnerable to financial abuse and scams. Sadly, the elderly are often taken advantage of by strangers — and sometimes even their own family members. That’s why it’s important that planning is in place to help seniors protect themselves and their assets.
As we age, it can become increasingly difficult to manage our assets. Most of us will, at some point, need assistance with these details to help ensure that our financial and other assets aren’t depleted. If you or an aging loved one are looking for ways to safeguard assets, a Trust is often the best way to do so. Trusts allow seniors to rest assured that their finances and assets are managed by a trusted person.
What is a Trust?
Trusts help protect and manage the assets of those who cannot do so themselves due to age, illness, or disability. Many seniors assume that a will is the only protection they need. However, trusts are designed to safeguard the assets of the living, while wills only outline what happens to a person’s assets when they pass away. Furthermore, wills are subject to the expensive and time consuming process known as probate in California, while Trusts allow beneficiaries to avoid probate after their loved one’s passing.
To establish a Trust the owner, or grantor places assets within the trust. The grantor then appoints a trustee to manage it and names beneficiaries to receive the assets of the trust when the time comes. That trustee can be the grantor themselves or third party trustee such as a responsible child or other trusted individual. A third party trustee makes all financial decisions regarding the assets placed in trust. This protects the grantor from fraud or mismanagement of assets. A third party trustee can help the surviving senior generate income from remaining assets via sales or investments and take advantage of tax benefits.
The appointment of a third party trustee is the equivalent of a legal firewall and should be considered anytime the grantor is vulnerable. The installment of a third party trustee can be accomplished by an amendment of an existing trust or by the creation of an entirely new trust.
There are different types of Trusts. Let’s take a look at each and the ways these trusts can benefit seniors.
A Revocable Living Trust safeguards seniors by making it more difficult for non-trustee family members to mismanage money or assets. The grantor (senior) can amend or revoke the trust at his or her own discretion without the consent of the beneficiary. This type of trust allows the grantor to stay in control of assets by either serving as a trustee or appointing one. In this case, the grantor, serving as trustee and beneficiary of the trust, appoints a successor in the event he or she becomes incapacitated or dies. This appointed person is then responsible for the disposal of the trust’s assets.
With very few exceptions, an Irrevocable Trust is one that cannot be changed by the grantor. This means that the grantor gives up his or her rights to control the assets once they are transferred. Seniors over 65 who are eligible for Medi-Cal often choose to transfer assets into an Irrevocable Medi-Cal Asset Preservation Trust to avoid having to dispose of assets in order to remain eligible for Medi-Cal coverage or long-term care benefits.
Once assets are in an irrevocable trust, they cannot be counted for Medi-Cal eligibility purposes, but there could be a penalty for transferring assets to an irrevocable trust if not done correctly. An elder law attorney can assist in determining the best way to set up this type of trust and how to best transfer assets based on Medi-Cal stipulations.
An Irrevocable Trust can provide income for seniors and their spouses. It also protects their property and other assets from being seized to pay for medical costs, without impacting Medi-Cal eligibility. This type of trust can also remain in place for a surviving spouse after the grantor’s death. If you would like to take a deeper dive into the use of an Irrevocable Medi-Cal Asset Preservation Trust for long-term care estate planning please download a free copy of my eBook, Understanding Long-Term Care Medi-Cal.
Ultimately, Trusts give seniors more control over their assets than a will, allowing them to set parameters and stipulations and appoint a trusted advisor to help them make decisions. If you or your loved one would like more information about setting up a Trust, we can help. Please contact us today at 877-585-1885 to schedule a free consultation to discuss your legal matters.
Thanks for reading.
Christopher E. Botti, Esq., Certified Specialist in Estate Planning, Trust and Probate Law