Not everyone needs a Trust Agreement, no matter how much trusts are touted as a part of an estate plan. In the past, a married couple needed to have separate trusts to lower their potential estate tax burden. With several recent tax law changes, that is no longer needed.
Trusts are often used to avoid probate. However, probate can also be avoided by titling assets using special designations like Joint & Survivorship, Payable on Death, Transfer on Death or naming a beneficiary. But there are a number of other reasons you might still need to use a trust in your estate planning.
What About Me?
One common situation is estate planning for a blended family or an unmarried couple. Here’s an example: A couple remarried in their 50s. They each had children from their first marriage. The husband died 20 years later. He had wanted to provide for his second wife, so he signed a will that stated that all of his assets were left to his wife with the understanding that, on his wife’s death, those assets would go to his children.
However, what actually happened is that upon the husband’s death, the surviving spouse just combined his assets with all of her assets. When she died, she left all of the assets to her children under her revised will. The husband’s children were left with nothing, despite their father’s wishes. They challenged the second spouse’s will but lost.
Their father didn’t plan properly. He should have set up what is commonly known as a Marital Trust. The trust would have held the assets for the benefit of his second wife upon his death. The trust terms prohibit the widow from transferring the assets to her children. Upon the wife’s passing, the assets would be directed back to his children under the terms of his trust.
This same issue could arise if the couple was not married or was a same-sex couple. Each wants to provide for their partner on death, but they may want assurances that, when their partner dies, the assets go back to their side of the family.
There are other issues that need unique trust planning rather than just a will. An example is a trust to provide for minor children until they reach a responsible age or even for their lifetime, to protect the assets from issues like creditors, divorce claims or lawsuits.
Additionally, assets cannot be left outright to a mentally or physically disabled child receiving government benefits like SSI or Medicaid. A Special Needs Trust protects assets for such a child. To protect assets from being spent entirely on a nursing home and to obtain Medicaid or VA benefits, you need an Irrevocable Medicaid or VA trust Agreement. These planning options are more complicated.
Everyone’s planning needs are different. The best way to know if you need a Trust Agreement as a part of your estate plan is to hire a reputable estate planning or elder law attorney. Don’t risk your inheritance on your best guess or your neighbor’s recommendation.
Laurie G. Steiner is a member of the law firm of Solomon, Steiner & Peck, Ltd. She is a Certified Elder Law Attorney by the National Elder Law Foundation and the Ohio State Bar Association. She practices in the areas of Elder Law, Medicaid, VA and Disability Planning, and Estate and Trust Planning and Administration. ssandplaw.com.
