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Question:
Now that I’ve created my Trust, what do I do next?
Answer:
After creating your Trust you must complete the process by legally transferring all of your assets to the trustee. Assets no formally transferred to the trustee will not be considered part of the Trust and might still be subject to probate.
Question:
What is a Trust?
Answer:
Trusts are among the most popular of today’s estate planning tools and are favored for their protection, privacy, tax benefits, and flexibility. There are many different types of trusts. Most of us spend a considerable amount of time and energy in our lives accumulating wealth for our own enjoyment and retirement and to provide for future generations. Trusts can help you preserve and increase your estate while your alive and offer protection in the event of incapacity insuring that your assets remain available for your care. Upon your death, trusts also avoid probate and insure that your assets pass to your beneficiaries instead of being siphoned off to government processes.
Revocable Trust
A “revocable” trust is one that may be changed or rescinded by the person who created it. This person is usually referred to as the “settlor”. Since the settlor retains control over the trust and its assets, Medicaid considers the assets of such trusts countable in determining Medicaid eligibility. Thus, revocable trusts are of no use in Medicaid planning. However, they are useful in a variety of other estate planning circumstances. For example, a revocable trust can be used to manage assets for inexperienced persons who have recently inherited wealth or for minors. Revocable trusts are useful for those lacking time to manage their property such as busy professionals. Revocable trusts are useful for tax planning, avoiding probate, avoiding guardianship and conservatorship in the event of incapacity, maintaining liquidity, and keeping privacy. These advantages and the flexibility of the Revocable Living Trust has made it an increasingly popular estate planning tool.
Irrevocable (Income only Trusts)
An “irrevocable” trust is one that cannot be changed after it has been created. An income-only trust is an “irrevocable” trust that may be used to protect your assets in the event of incapacity. In most cases an Income Only Trust is drafted so that the income is payable to an individual for life but the principal cannot be touched. At the death of the individual the principal is paid to the heirs or beneficiaries. This way, the principal of the trust is protected and the income is available for living expenses. For Medicaid purposes, the principal in such trusts is not counted as a resource, provided the trustee cannot pay it to the individual for his or her benefit. However, if the individual moves to a nursing home, the trust income will have to go to the nursing home. Obviously there are drawbacks to this type of arrangement, primarily, you cannot gain access to the trust funds even if you need them for some other purpose. Also, funding an irrevocable trust can cause ineligibility for Medicaid for five years.
Testamentary Trusts
Testamentary trusts are trusts created by a person’s will. Testamentary trusts can provide an important way to provide for a spouse, minor child, or loved one that is disabled. Testamentary trusts work well when a person does not have a lot of liquid assets or sufficient assets to establish a revocable living trust but has other types of non-liquid assets such as life insurance, retirement benefits, and other benefits payable upon death. Many young couples with young children create testamentary trusts under their wills to provide for the education, support and
Question:
How can I avoid the necessity of a Guardianship or Conservatorship?
Answer:
If a person has planned ahead and prepared a Durable Power of Attorney (a Power of Attorney that is still valid if the person becomes incapacitated), and an Advanced Directive for Health Care, then, the person given the Power of Attorney should be able to step in and take over the affairs of the incapacitated person without the need for a Guardian or Conservator. Once a person has become incapacitated, however, they cannot legally make a Power of Attorney or sign an Advance Directive. Appointment of a Guardian or Conservator is likely the only option available if the person has not planned ahead.
Another planning option that many people use is known as a Revocable Living Trust, commonly known as a “Living Trust.” A Living Trust is a legal document that can provide for the management of your affairs if you become disabled or incapacitated. A Living Trust also can eliminate Probate upon your death.
Question:
What happens in a Guardianship and Conservatorship proceeding?
Answer:
First, someone interested in the financial affairs and/or the well-being of a person believed to be incapacitated must file a legal petition with the Probate court and pay the required court filing fee. The person believed to be in need of a Guardian or Conservator is called the “Respondent.” The person who files the legal petition is call the “Petitioner.”
The petition must also be accompanied by a Notice to the Respondent and to any other interested person who must be notified of the pending legal action. The Respondent and any other interested person may file an objection with the court opposing the petition upon receiving notice of the Guardianship or Conservatorship case. The objection must be filed with the court within 15 days of receiving notice of the petition and must be submitted with the required filing fee.
After the petition has been filed, the court will appoint a “court visitor,” who will interview the respondent and any other interested persons with information concerning the petition. The court visitor will then provide a written report of their findings to the court along with a recommendation as to whether or not the visitor believes that appointment of a Guardian or Conservator is appropriate.
Question:
My companion of 15 years died recently and his children are asking to pick up a bunch of things that they say belong to him. My companion and I had never been married but we put the house into joint ownership with right of survivorship. There are also a number of personal things that we bought together, I bought individually, or he and I each bought to help take care of the house. I think I should be entitled to this property but his children are being quite forceful about demanding a number of those items. My companion didn’t have a Will. What can I do?
Answer:
It is fortunate that you and your companion put the house into joint tenancy which means that ownership automatically passes to you upon the death of your companion. The personal property is much more problematic. If your companion had left a Will, he could have provided for his own children to the extent desired, and you would have known ahead of time which items would have gone to them and which property would go to you. Without a Will, any property owned or purchased by your companion alone, legally, belongs to his children. However, they are not entitled to come into your home or your garage without your permission and simply take items which may be in dispute. If they insist on coming onto your property without permission, you can call the police and charge them with trespassing. Also, if they remove property which in fact belongs to you, they can also be charged with theft. The biggest problem with personal property is that it is untitled and proving ownership is difficult. I would suggest a negotiated settlement with them as to which items they can take and which items you should keep. If that doesn’t work, the children can probate their father’s estate but, again, they have the burden of proving which personal property they have a right to. This would be both costly and time consuming. This is a situation where it is in everyone’s best interest to try to work out a reasonable agreement. And, also a lesson to us all of the importance of having a Will.