Your Last Will and Testament may serve as the primary estate planning document for your comprehensive estate plan; however, you will likely incorporate additional strategies and tools into your plan as well to ensure that you achieve all your estate planning goals and objectives. One of the most common additions to the average estate plan is a trust.
If you decide to include a trust in your overall estate plan you will need to decide which type of trust will work best in your plan. If you decide a living trust is best for your plan, you will then need to choose between a revocable and an irrevocable living trust.
Since an irrevocable living trust prohibits you from modifying or terminating the trust after it is created, you may be wondering why people use these trusts. There are actually several good reasons why people include irrevocable trusts in their estate plans. One of these reasons might apply to your estate planning goals and objectives.
Special Needs Planning
If you are the parent of a child with special needs, you already know some of the challenges a faced when raising a child with special needs. You also probably already have some idea of the costs involved and the time needed. Consequently, for the parents of a child with special needs, estate planning takes on a heightened importance.
While your child is a minor, obtaining assistance from state and federal programs such as Medicaid and Supplemental Security Income is crucial. Pending on the type and severity of your child’s disability, your child may continue to need that assistance as an adult. Unfortunately, the law considers your child a legal adult when he/she turns 18 which means eligibility for state and federal assistance programs will be based, in part, on your child’s income and assets.
Even if the income limits aren’t a problem in your situation, the asset limit could be if you, or another well-meaning relative, gift assets directly to your child in an estate plan or at any other time. Your child could lose his eligibility for much needed assistance. The good news is that an irrevocable special needs trust can help.
A special needs trust is an irrevocable living trust that supplements the care and assistance that an individual receives from other sources. As long as the trust is properly drafted, the state and federal government will recognize it as an irrevocable special needs trust and the assets held in the trust will not jeopardize the beneficiaries eligibility for assistance.
Medicaid Planning
Almost half of all seniors in nursing homes across the country depend on Medicaid to help defray the high cost of that care. Qualifying for Medicaid, however, can be problematic for a senior because eligibility is based, in part, on an applicant’s income and assets.
If your non-exempt assets exceed the limit at the time you apply for Medicaid, you will be forced to “spend-down” those assets, which essentially means sell the assets to help cover your nursing home costs. One way to avoid that outcome is to establish a irrevocable Medicaid trust as part of a Medicaid planning component in your estate plan.
A Medicaid trust is an irrevocable trust that protects your non-exempt assets and allows you to qualify for Medicaid when you need it.
Asset Protection
Asset protection should be a consideration in every estate plan because there are likely more potential threats to your assets than you realize. Divorce, economic downturns, creditors, and even spendthrift beneficiaries can all create a threat to your hard-earned assets. By transferring assets into an irrevocable living trust, you remove those assets from your estate, thereby placing out of the reach of the numerous threats that could be lurking around the corner.
The concept is simple. If your assets are in an irrevocable trust, you no longer have any legal ownership interest in the assets because they are now owned by the irrevocable trust, they cannot be lost to divorce, creditors or any of the numerous other potential threats.
Contact Us
If you have additional questions or concerns regarding the reasons to include irrevocable trusts in your estate plan, contact the experienced Georgia estate planning attorneys at Fouts Law Group, LLC by calling (678) 242-8344 to schedule an appointment.
