For some people, estate planning is synonymous with drafting a will. Wills are certainly important documents that help protect dependents, establish a beneficiary’s right of inheritance and allow a testator to choose the personal representative of their estate.
However, there are limitations to what people can achieve with wills. Trusts are beneficial supplements to many estate plans. They can serve a broad assortment of roles throughout the testator’s life and after their death.
The protection of assets
Trusts can help preserve assets from a variety of risks. They can protect assets from creditor actions and divorce while the testator is alive. They can even protect assets from liquidation due to lawsuits. That protection can persist after an individual dies. Assets that don’t pass through probate court are typically not subject to liquidation for the repayment of creditors or Medicaid estate recovery efforts. Trusts can also protect beneficiaries from losing their inheritance if they divorce.
Improved access to benefits
Many older adults may eventually require Medicaid to pay for their care if they must move into a nursing home or require in-home medical assistance. Qualifying for Medicaid can be a challenge, as there are strict limits to both countable assets and income. Trusts limit what assets people have in their own names and can make it easier for them to qualify for Medicaid without a penalty.
Control over asset use
When people bequeath assets directly to beneficiaries using a will, those parties have absolute control over those assets after inheriting them. When testators instead use assets to fund a trust, they can establish clear standards for when people can access trust resources and what they can use them to accomplish.
Some testators specifically limit the use of trust assets for certain costs, such as educational expenses or medical costs. They may also require that beneficiaries meet certain standards to qualify for distributions from the trust. A trust can, therefore, protect people who may have issues with substance abuse or compulsive gambling. It can also help a beneficiary with special needs by preventing their direct control over assets and keeping them eligible for crucial state benefits.
There are a host of other potential uses of trusts during the estate planning process. Discussing personal goals and concerns with a skilled legal team can help people determine whether a trust is the right tool for establishing their legacy. There is an assortment of different types of trusts, each of which can help people achieve different estate planning goals.
