Elder Law, estate planning
Not All Trusts Are Alike!
By Rick Law, Senior Care Advocate and Estate Planning Attorney in Suburban Aurora, Illinois just outside of Chicago. Many times, we get a call from an adult child who has just been told that his or her elderly parent needs long-term care in a facility. The child will tell us, “My mom has a trust, so everything is protected.” We have to ask, “Is it a revocable living trust?” The answer often comes back quickly, “Yes.” The caller thinks that all is well but we have to inform them that the assets in the trust are completely available to be spent on care for the parent. Sometimes, the child is confused: “But doesn’t the trust protect the assets?” Sometimes the child is angry: “The lawyer said this would protect Mom’s assets!” Sometimes we hear denial: “No, that just can’t be right.” The problem is that not all trusts are alike. When you hear the word “trust,” you think it sounds like a good word. In this case, the parent has the type of trust that we refer to as “the open box.” This means that at any time, the trustmaker can reach into the open box (the trust), take out money, and spend it on whatever they want. But if they can reach into the open box and spend the income and assets, so can creditors (which would include a long-term care facility). All the assets in the trust are available for medical expenses of the person who created the trust and has had control of the trust. Trusts that are called “revocable living trusts” can be revoked or amended. The money in the trust can be used for the trustmaker’s healthcare costs, education costs, maintenance expenses, and support; often referred to as the “HEMS” standard. People commonly are told they should get a trust to avoid probate. Revocable living trusts do avoid probate if properly funded, but they are not asset-protection trusts. Does the parent have a trust? Yes. Will they avoid probate at death? It depends. Are the assets in the trust protected against being spent down on care? No. That would be an entirely different type of trust. In general, trusts that “protect” assets are referred to as “irrevocable trusts,” and, just as with revocable trusts, all irrevocable trusts are not all the same. 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 630-585-5200 or 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. Sincerely, 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.