Trusts are meant to solve problems. Different problems have different solutions, one of which may be a trust. These are the most common problems seniors face where a trust is one solution:
- Problem: avoiding probate while keeping control. If you want to keep control of your assets (house, bank accounts, etc.) while allowing your kids to avoid probate after you die, you probably want to own your assets as trustee of your very own revocable and amendable trust (meaning you can always take out what you put into it and you can change the terms of the trust whenever you want), while naming one or more of your children as the successor trustee after you die. That child could then take over after you die (or become incompetent) and distribute all assets without going through the time and expense of the probate process. This is more expensive than just creating a will and does not save you any time or money, but it saves your children a lot of both. Alternatives: hold your assets jointly with someone or give your assets away before you die.
- Problem: protecting assets for MassHealth purposes for the surviving spouse after the first spouse dies. If that’s your goal, you want to have a will with a testamentary trust (a trust that’s part of the will). Typically, you could name the child you trust the most as trustee. If you have a testamentary trust in place when you die, any assets in your individual name (not jointly held assets or assets in trust or assets that name a beneficiary) will be immediately safe, non-countable and non-lienable if your spouse needs to qualify for MassHealth. Alternative #1: in your will, leave your assets directly to your children. Alternative #2: give your assets away and wait five years (see more below).
- Problem: protecting your assets if you need nursing home care and your spouse is already deceased. In this scenario, the only way to have any of your assets be non-countable and non-lienable is to give them away and wait five years (or get married). Often, in that situation, you would create an irrevocable trust (meaning you cannot take out what you put in and you can’t change the trust terms), naming your most trusted child as trustee, then transfer to the trust any assets you want to protect. Alternative #1: you can keep the income the trust earns but you can’t get back any of the principal that you put in the trust. Alternative #2: give your assets to your most trusted child or to all your children and wait five years.
That’s the long answer. Now the short one: talk to an elder law attorney who can help you figure out which one of these alternatives will solve your problem and is best for your situation. If you want to learn more about these issues, you can watch this month’s episode of Elder Law 101. You can find it on MVTV (Comcast 13) or visit Frank and Mary’s YouTube channel, www.youtube.com/elderlawfrankandmary. If you have any questions, please contact me at 508-860-1470 or email@example.com.
Arthur P. Bergeron is an elder law attorney in the trusts and estates group at Mirick O’Connell.