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WHAT ARE TRUSTS AND HOW CAN THE BENEFIT ME?

BY: LAMA ALQASEMI, ESQ.

Some people may have heard the term come up in passing during a conversation and others may have read about it on a brochure or magazine. Trust. Sounds like a fancy legal document that only people with plenty of financial assets would have.

The truth is, these legal documents are common estate planning tools that lawyers employ for their clients, even in cases where the client’s assets are extremely limited. It’s vital to understand why and how trusts can be used to protect you or your loved one.

First off, what is a trust?

Think of a trust like a treasure chest. You originally bought property or earned money in your own name. You then transfer those assets into the trust’s name – into your treasure chest, in other words. The trust treasure chest becomes a legal entity separate from you, which now holds your property in its, and no longer in your, name.

Then you identify people who will occupy the three roles involved in managing trust property. First, you are the grantor, meaning you are the person creating the trust and funding it with assets. Second, you appoint a trustee. That person or entity is responsible for managing trust assets and following directions contained in the trust document. The trustee may or may not be you. Third, you decide whom you want to receive trust assets – your beneficiary or beneficiaries, in other words. 

In legal terms, a trust is a fiduciary agreement among you the original property-owner, your trustee, and your beneficiary. The trust document contains instructions for what you want done with trust property, both for how you want it invested and, also, for how you want trust assets to be distributed when you pass. Trusts are, thus, a highly efficient hybrid between a power of attorney, an asset-management vehicle, and a last will and testament, all rolled into one legal entity and document.

Trusts come in all shapes and sizes, there really is no one-size-fits-all. The real question becomes, what are your goals that you want accomplished? Asset protection? Avoiding probate after you pass? Trying to qualify for government benefits without losing all your assets? Protecting your heirs from an unfavorable asset settlement in the case of divorce? Trying to avoid unnecessary taxes once you pass?

Trusts can be revocable and irrevocable. Depending on the type of trust, it can have special provisions that protect your assets from creditors. It can also set out how you want your assets to be managed during your lifetime and after you pass. 

Most recently, Susan came in worried that her daughter’s unhappy marriage would result in an eventual divorce. She feared that the money her daughter would inherit from her would potentially end up with her husband if that were to happen. Her daughter was her only child and she had never been in a position where she had to support herself. Once I sat down with Susan and assessed her situation and goals, I was able to look at her assets and design a trust that limited the distributions her daughter would receive if she ever was in the process of a divorce. Susan was thrilled to get her trust in place so that she could rest at night knowing that her daughter was taken care of.

The trust I created for Susan was very different from the trust I created for another client to get him qualified for Medicaid. Toby came to Absolute Law Group worried about how he was going to pay for his wife’s care at a skilled nursing facility as their assets were rapidly dwindling down. He was afraid that if he did not act soon, he would end up destitute and there would no longer be a way to pay for his wife’s care. After an emotional and heartfelt conversation, I was able to give Toby an option that he had not heard of before. Because he was over the asset threshold for Medicaid, he was told his wife would not qualify for the extra income from Medicaid to pay for her care at the facility. But with the use of a trust, we were able to shield Toby’s assets and qualify her for Medicaid without Toby having to spend down their assets. Toby’s wife now has extra income each month that helps her pay for her nursing home care and Toby can finally take a sigh of relief knowing that he will not have to give up all his assets for extra help to kick in. 

If you have any questions or concerns regarding you or your loved one’s care, please know that support is available, because even the most prepared will need help at one turn or another. You can always reach out to Absolute Law Group for a consultation as you prepare for the next step in your loved one’s care. Our office number is 352-205-4455.

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