Creating an estate plan must be a priority for all adults. These plans have many components that help to ensure the creator’s affairs are taken care of if they’re incapacitated and that they’re able to pass down assets to their loved ones.
One component of these plans is the trust. A trust is a useful tool that can help people while the creator is still alive and after they pass away. There are many types of trusts that you can set up as part of your estate plan.
Trusts to pay medical bills
For some people, paying medical bills is a challenge. Trusts can help with this because the trust can pay an unlimited amount of medical expenses for a person as long as the trust pays the bill directly to the medical facility or provider.
It’s possible to use a trust to pay a medical bill through the patient; however, there are limits to how much can be paid each year before the amount is subjected to a gift tax. The only way to bypass that gift tax for medical expense payments that are over the current year’s limit is to pay them directly instead of giving money to the patient to pay the bill.
Special needs trusts are a specific type of trust that you can set up to help a person with their life expenses, including some medical expenses. The terms for these must be spelled out in detail, and the value of the trust doesn’t count against asset limits for the beneficiary so they can continue to qualify for need-based programs.
Irrevocable trusts as protection from medical debt collectors
Irrevocable trusts can also provide asset preservation for the creator. When assets are placed in an irrevocable trust, creditors can’t make claims against those assets. This means that if the creator is sued for old medical bills, those assets can’t be touched so they can be passed down to that person’s heirs as intended.
Creating an estate plan that meets your needs and gets your assets passed down to your loved ones as efficiently as possible is a priority. You can work with someone familiar with these situations so they can help you to determine your options.