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Elder Law and Estate Planning provided to Randolph, MA
The author Brigitte von Weiss of VON WEISS LAW OFFICE is an estate planning and elder law attorney in Easton, MA. She is often asked about common estate planning errors.
Von Weiss Law Office announces a common estate planning error is failing to consider testamentary trusts to reduce the amount of assets potentially subject to one’s spouse’s long-term-care needs.
Families are advised that a testamentary trust is a trust created by the terms of a person’s Last Will and Testament. The idea behind this strategy is to ensure that the surviving spouse does not inherit all of the couple’s assets and instead a portion of the couple’s assets is left to the first-to-die spouse’s testamentary trust. For example, assume that John dies first and leaves everything to Mary. Under these facts, all their assets are exposed to Mary’s long-term-care needs. In contrast, if they have testamentary trusts and split up and retitle their assets, upon John’s death, a portion of the assets would pass to his testamentary trust for the benefit of Mary. If she applies for MassHealth long-term-care benefits, the trust assets are not considered to be Mary’s as long as the language of the trust indicates that distributions are solely at the Trustee’s discretion.
This announcement is for everyone to know, “The devil is in the details” In order for this strategy to work, Mary and John must (1) execute new Wills containing testamentary trusts for the benefit of the other and (2) split up jointly-owned assets and retitle real estate so that the real estate is owned as “tenants in common” or solely by John or Mary. If these two steps are taken properly, upon John’s death, a portion of his assets pass via his Will to his testamentary trust for the benefit of Mary and the trust assets are protected if Mary needs nursing home care now or in the future.
Please contact www.vonweisslaw.com for further details. In addition to this announcement, families should know some of the disadvantages of the testamentary trust strategy.
This strategy requires a probate at John’s death.
· After John’s death, there will be ongoing administrative costs as the Trustee will have to file annual tax returns for the trust and accountants charge more for preparation of trust returns than individual returns.
· This strategy will not work if both Mary and John require nursing home care.
· It may be difficult to take out a mortgage or line of credit on real estate held in a testamentary trust.
· This strategy requires that Mary not be the Trustee and this is problematic if Mary and the Trustee disagree on how to spend (or not spend) the trust assets.
Arguably, testamentary trusts allow elders to have their cake and eat it too as this strategy enables elders to protect assets and yet have those assets available to them. However, this technique is not a one-size-fits-all as the surviving spouse must give up control of a portion of the assets. Nonetheless, testamentary trusts should be considered by couples who strongly desire that their children inherit a portion of the assets even if the surviving spouse needs nursing home care and are comfortable with the surviving spouse’s loss of control over a portion of the assets.
Nothing in this article should be considered legal advice as this is a complicated area of the law. Families should contact a qualified Elder Law Attorney for Elder Law and Estate Planning Services customized for their personal needs.
Release ID: 444751