By Elder Law attorney Rick Law, Senior Advocate and Managing Partner at the Estate Planning Center at Law Elder Law in Western Chicagoland.
The reasoning behind a testamentary special-needs trust seems to be that it was apparent to the federal government that nobody is going to be transferring assets to a spouse to avoid Medicaid by choosing to die to get those assets transferred to the spouse. Therefore, it is an allowable route to create a special-needs trust.
Some of the spouse’s assets may be channeled into a special-needs trust for the benefit of the spouse and it will be an allowable transfer. One of the most difficult problems in dealing with a testamentary trust is that they do not begin to function until the death of the testator. There are many circumstances in which a special-needs trust may be needed prior to the death of the individual who may wish to fund a trust for a person with Alzheimer’s.
Trusts written within a will are sometimes deemed to be “trapped inside the will.” This means that they are absolutely ineffective unless and until the grantor dies. The trust will be trapped inside the will when considering having a testamentary trust drafted. While these trusts can be a powerful tool, they are not the best tool for every situation.
When considering a trust for your spouse, it is actually a requirement that a special-needs trust for a spouse be testamentary in order to protect the assets from Medicaid spend-down.
In the case of anyone other than a spouse, there is no need for the trust to be testamentary. Any third party that is not legally responsible for the health care of an ill person may create a Medicaid no-payback special-needs trust for an ill person. They may use either an inter vivos trust or a testamentary trust to accomplish that goal.
Another powerful tool is the third-party trust created for a public benefits recipient. Because this type of special-needs trust is more commonly used to protect a child with disabilities.
In the end, when it comes to your estate plan, it is imperative that you don’t look at it as a cookie-cutter, fill out the standard form kind of deal. Every family’s situation is unique and a qualified elder care attorney -as can be found in the team at Law Elder Law – is here to help you navigate these difficult legal challenges.
If you’re ready to start getting your estate in order and secure your assets for the “worst-case” scenario, please give our office a call at 800-310-3100. Your first consultation is absolutely free. We’ll let you know what steps you need to take, right now, to protect yourself and your family. Call now.
Rick L. Law, Attorney, Estate Planner for Retirees.
Rick was named the #1 Illinois elder law estate planning attorney by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine, TheStreet.com, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future. Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care. Call 800-310-3100 for your free consultation now!