In the last issue of the Virginia Woman Magazine, I shared my belief that the decision to incorporate a Trust into an estate plan should be based upon careful consideration of a number of factors. Two of these factors – incapacity and control – will be explored in this article. A trust is a complex legal structure that provides a set of detailed
A trust is a complex legal structure that provides a set of detailed instructions to the trustee (i.e., the person that manages the trust) on how and when the trust assets will be used for the named beneficiaries. With a Revocable Living Trust, you are the beneficiary during your lifetime, and very often, you will serve as the initial Trustee. After your death, the Trust serves as a tool to manage your assets for the benefit of your beneficiaries. Similarly, there are many forms of irrevocable trusts that can be established during your lifetime for the benefit of others. As our population ages, the risk of developing
As our population ages, the risk of developing dementia-related illnesses increases. The Alzheimer’s Association recently published a number of startling statistics (See http://www.alz.org/facts/). Currently, there are over 5 million people in America living with Alzheimer’s disease, someone new develops the disease every 66 seconds and 1 in 3 Americans dies with Alzheimer’s or some other form of dementia. Without a breakthrough in the prevention and cure of the illness, it is expected that the number of individuals afflicted with the disease will triple by 2050 with someone developing the disease every 33 seconds. In addition to Alzheimer’s, there are many illnesses that impact cognitive function and they can develop suddenly or over time. When cognitive
function is impaired, the ability to manage our personal and financial decisions is impacted. As the level of impairment increases, it becomes necessary to rely on others to handle decisions for us.
For all of these situations, a trust can be extremely valuable tool. The trustee can assume responsibility for the more complex financial decisions and, as the impairment escalates, our day-to-day financial management and decision making. It can provide flexibility, ease of administration and avoid the publicity involved with court supervised guardianship and conservatorship hearings and reporting.
Similar benefits can be achieved by using a trust for our heirs. For beneficiaries suffering from a cognitive impairment or physical disability, a trust can be used to manage an inheritance and provide clear guidance on the manner in which the funds will be used to provide for the beneficiary. It is even possible to structure these trusts to enable the beneficiary to continue eligibility for government programs, such as SSDI and Medicare, while using inherited funds to supplement government support.
Often times, it is desirable to restrict a beneficiary’s access to an inheritance – not because of a true medical disability, but for reasons such as the beneficiary’s age (legally a minor), lack of maturity/wisdom, the lack of experience in financial matters, history of poor decision making in the areas of spending, drug and/or alcohol usage, susceptibility to influence/pressure by others or a desire to protect the beneficiary from future claims of creditors or divorcing spouses. At other times, a pool of funds might be set aside for benefit of a group of beneficiaries, such as an education fund for grandchildren or a health care fund for aging parents and siblings. The terms of these trusts can be carefully drafted to address the situation at hand and ensure that your wealth is being managed for the benefit of your loved ones and used in accordance with your wishes for years, and even decades, to come. If you would like to discuss whether a trust makes sense for you and your
If you would like to discuss whether a trust makes sense for you and your estate plan, please call to schedule a complimentary consultation.
By Dawn M. Dale, Esq.
McLean, Virginia 22102