We are going to explain some of the reasons why people use trusts in this post. Since there are so many of them, this is part one of a two-part series.
Many people want to protect the inheritances that they are leaving to loved ones who are inexperienced or not very good with money. This can be done through the use of a revocable living trust with a spendthrift provision.
You would act as the trustee during your lifetime so you would retain total control of the assets while you are living if you establish this type of trust. The loved one that you want to provide for would be the beneficiary upon your death.
After your passing, the trust would be irrevocable, and the beneficiary would not have direct access to the principal. The trustee would distribute assets to the beneficiary in accordance with terms you provide in the trust declaration.
Since the beneficiary would not be able to access the principal, the beneficiary’s creditors would be in the same position so there would be built-in asset protection.
Special Needs Planning
Most people with disabilities rely on Medicaid as a source of health insurance, and these folks also receive Supplemental Security Income (SSI). These are need-based programs so there are very low income and asset limits.
A direct inheritance through the terms of a will could create problems for someone who is relying on these benefits. As a response, you could use a supplemental needs trust as an alternative.
Medicaid does not cover every medical procedure and health care related treatment, and the SSI payouts are very modest. Under the rules of the program, the trustee would be able to use assets in the trust to satisfy the unmet needs of the beneficiary.
Eligibility would remain intact, and assets that remain in the trust after the death of the beneficiary would go to a successor beneficiary you name in the trust declaration.
A Trust Can Provide Guidance
Let’s say that you have a young person on your inheritance list and you want to make sure that your beneficiary achieves his or her full potential. Under these circumstances, you could fund an incentive trust.
The terms of the trust would include stipulations that must be met by the beneficiary. For example, you could instruct the trustee to pay tuition and living expenses as long as the beneficiary remains in college.
You can foster a work ethic by allowing for a dollar for dollar match of money that is earned by the beneficiary after graduation. This is hypothetical scenario, but you would have the ability to establish any terms that make sense to you.
It should be noted that incentive trusts can also be used to guide someone away from negative behavior like substance abuse or a gambling addiction.
Attend a Free Webinar
We have hundreds of blog posts like this one that you can explore, and there are other resources on the site that we offer free of charge. In addition to these materials, we have traditionally offered in-person seminars, but we have shifted over to webinars as a response to the pandemic.
You can learn a lot if you attend one of these sessions, and the webinar format is especially appealing because it is more convenient. There is no charge to attend these webinars, but we ask that you register in advance so we can reserve your spot.
If you are in the Charlotte, North Carolina area, you can click this link to see the dates, and we also have a schedule for our Ashland, Kentucky estate planning webinars.
Need Help Now?
At some point, it is time to take action and work with an attorney to put an estate plan in place. If that time is now, you can schedule a consultation at our Charlotte, NC or Huntersville, NC office if you call us at 704-944-3245.
The number for our Ashland, KY location is 606-324-5516, and the number for our Florence, KY location is (859) 372-6655. Or you can fill out our contact form if you would like to send us a message.
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