An Estate Planning lawyer that tries to push trusts on everyone is not doing anyone any favors, except themselves and their own wallets.

Other lawyers hate that we share this information, but we think it is important for people to know. Especially for people that have trusts already that think they have one thing and really, they have something completely different. Trusts are great and might be the perfect solution to some problems, but they aren’t the solution to every problem. The first question to answer is, “do I really need a trust?”.

Just as important as whether you even need a trust, is what kind of trust you need. Not everyone needs a trust and that is important to keep in mind when talking to your Estate Planning lawyer. Every situation and client are different! There is no one-size-fits-all solution. This is why we have our Strategic Planning Session in place! During your session, we tailor our recommendations based on your goals. Only then, when looking at the best and most efficient way to accomplish these goals, we might recommenced a trust.

For people that need one, trusts can be a great thing! There are hundreds of different types. I am going to go over the 5 specific types briefly in this blog. For more information, download our free report 5 Trusts That Can Wreck Your Estate Plan!

The five specific types that we utilize the most 

  • Family Trusts
  • Special Needs Trusts
  • Credit Shelter Trusts
  • Life Insurance Trusts
  • Medicaid Trusts

Each trust can provide a great benefit, but if done wrong or it is unnecessary for you, then it can wreck your estate plan and waste your money!

Here are some basics on each trust and how they can wreck your estate plan if you are not careful!

Family Trust

What is a Family Trust?

  • Holds assets for your family members when leaving your estate or a gift to minors
  • To spread out the gift in increments over time, instead of a lump sum
  • To avoid probate

How It Can Wreck Your Estate Plan:

What if you name the wrong trustee? What if the trustee has a money problem or their own? I am dealing with a case right now where a mom, now deceased, chose her sister to be the trustee. Turns out, this trustee was diverting funds to her kids instead of the mom's! This is why you need sound advice about why or why not to chose certain people to be your trustee. You can only get this advice from a trustworthy lawyer! 

Special Needs Trust

What is a Special Needs Trust?

  • To protect a beneficiary that has a disability and/or is receiving government benefits such as Medicaid, MassHealth, or assistance with their rent 
  • To preserve government benefits that might otherwise be lost if the funds were in the disabled person's name

How It Can Wreck Your Estate Plan:

The language has to be perfectly written. Otherwise, the trust funds could be viewed by governmental entities as "available" and not just as a supplement to benefits. The trust funds have to be available to supplement the benefits being received, not take their place. If done wrong, bye-bye benefits! 

Credit Shelter Trust

What is a Special Needs Trust? 
  • Helps you give your assets to your family and not the government by reducing or eliminating the estate tax that would be paid from your beneficiaries' share
  • Works for married couples 

How It Can Wreck Your Estate Plan:

One mistake with the trust language, the tax savings disappear!  Trusts can appear to be credit shelter trusts, only the trust does not provide any estate tax protection at all. Be careful - if you do one, make sure it is done by an expert! When we recommend one of these trusts we always give the real numbers. In most cases, we can cut the estate taxes down to zero!

Irrevocable Life Insurance Trust

What is a Life Insurance Trust?

  • The life insurance trust is sometimes called an "ILIT"
  • To reduce the estate taxes by removing the life insurance death benefit amount from your total taxable estate. 

How It Can Wreck Your Estate Plan:

Make one mistake with the verbiage, and the trust is useless. The tax savings can be lost in the blink of an eye. We review trusts every day that people think are proper ILIT’s, only for us to have to tell them that trust is pure garbage.

 Medicaid Trust

What is a Medicaid Trust?

  • Protects assets, typically the home, from Medicaid, nursing home and long-term care liens
  • Protects rental properties and vacation homes from nursing home and long-term care liens

How It Can Wreck Your Estate Plan:

In order for this trust to be drafted correctly, you need a specialist in estate planning! Clients think that they are all set because their house is already in a trust. When reviewed, it becomes clear that the existing trust has no Medicaid protection. Sometimes the clients' homes have been in these trusts for years and we have to tell them that they need to start all over again. Not only is this a financial burden but the real problem is Medicaid's 5-year look-back. Go HERE to download our report on Medicaid Trusts and learn more.

Be careful if you have a trust already. Expert-level knowledge is required to write one of these types of trusts!

I encourage you to go to our website, and read our Free Report on Trusts, called 5 Trusts That Can Wreck Your Estate Plan! Learn more about each trust and see which is the best option for you!

Be the first to comment!
Post a Comment