Wills can accomplish many different estate planning goals. People can appoint a guardian to care for their children or nominate a personal representative to oversee estate administration. They can identify their beneficiaries and dictate what each beneficiary inherits from the estate.
However, there are limitations to what wills can accomplish. There are many scenarios in which testators may find that creating a trust instead of or in addition to drafting a will is the best way to achieve their goals. What types of scenarios may make funding a trust a worthwhile undertaking?
1. Beneficiaries in difficult situations
Perhaps an individual wants to leave assets for an adult child who struggles with substance abuse. They may not want to provide the addicted beneficiary with direct access to inherited resources out of fear of the beneficiary abusing those resources.
Maybe a beneficiary is in a volatile marriage, and a parent does not want their son-in-law or daughter-in-law to gain control of property intended for their child if a divorce occurs. Both of those scenarios might make the creation of a trust a smart decision. Beneficiaries who are still minors or who have special needs might also benefit from the creation of a trust rather than inheriting directly via a will.
2. Concerns about long-term care
Older adults may know that Alzheimer’s disease runs in their families. They may also have pre-existing conditions that increase their likelihood of needing extensive support later in life.
Medicare coverage generally does not pay for nursing home care or other long-term care needs. People hoping to qualify quickly for Medicaid when they are in need may find that establishing a trust at least five years before they apply gives them the best chance of qualifying quickly.
3. A desire to protect assets
Perhaps an older adult recognizes that their resources are insufficient to cover care costs. They may worry about Medicaid estate recovery efforts diminishing what their loved ones inherit. A trust can prevent assets from forced liquidation to repay Medicaid benefits.
Trusts are also beneficial for those worried about balancing their budgets while living on a fixed income. Creditors generally cannot force the liquidation of assets owned by a trust or place liens against them to compel people to make payments. The trust can protect resources from creditor lawsuits while the trustor is alive and from probate claims after the trust creator passes.
Adding a trust to a comprehensive estate plan can be a smart decision. Looking into different estate planning options can help people draft documents that offer robust protection.