Estate planning is one of the most important steps a person can take to make sure that their final property and health care wishes are honored, and that loved ones are provided for in their absence. Though often overlooked or put off in favor of more immediate concerns, a comprehensive estate plan can resolve a number of legal questions that arise whenever anyone passes away.

Trusts have become an integral part in estate planning. A trust is a fiduciary arrangement that allows a third party (a trustee) to hold and manage the assets of the creator of the trust (the grantor) on behalf of the grantor’s beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. Trusts are used for minimizing estate taxes and can offer other benefits as part of a well-crafted estate plan. Some of those other benefits include:

• Controlling Wealth: With a trust, a grantor can specify the terms of the trust and control when and to whom distributions may be made. A trust can also be set up as a revocable trust, so that the trust assets remain accessible to the grantor during his or her lifetime while designating to whom the remaining assets will pass thereafter.

• Wealth Protection: A properly constructed trust can help protect an estate from creditors of the estate’s heirs or from beneficiaries who are not able to manage money responsibly.

• Privacy: A person’s last will and testament is a matter of public record (after filing with the courts). However, a trust is a private document and may allow assets to pass outside of the court system and remain private.

Special Trust for the Elderly

Estate planners and elder law attorneys are often faced with the challenge of protecting the assets of an aging client, who is vulnerable to dishonest relatives, friends and caregivers.

Clients typically want to maintain control of their assets as long as practically possible, but also want to protect those assets from the undue influence when he/she is vulnerable, either due to age, health or other reasons. These two goals conflict because if a person retains the power to change his estate plan, that person is susceptible to influence from outsiders. On the other hand, if you take away the client’s power to change his estate plan, he may feel that he or she has been restrained from doing as he pleases. Forming a special estate planning trust for the elderly resolves these problems in a way that many clients feel comfortable with.

Example: Jacob and Rachel were happily married for 52 years, and lived well into their seventies. They had three adult children and many grandchildren. Jacob and Rachel were accustomed to having complete control of their assets, but their ultimate goal was to divide their assets evenly among their three children. Unfortunately, Rachel passed away, and Jacob became depressed. One day, Jacob befriended Marilyn, who had been struggling financially. Over the next 10 years, Jacob mortgaged his house and spent upwards of $800,000 on Marilyn. Eventually he was forced to sell his house and move in with his kids.

Had Jacob and Rachel planned ahead and created a special trust designed for the elderly, Jacob and Rachel would have been free to control their assets as they wished, including buying, selling, giving away and spending money or property. However, when either Jacob or Rachel died or became disabled, the trust would have become irrevocable and no longer changeable. As a result, when Rachel passed away and Jacob became depressed, he would no longer have had the ability to mortgage his house, sell his house, or spend considerable amounts of money on Marilyn, or anyone else for that matter. Forming a special estate planning trust would have allowed the wealth to remain intact to be passed down to their children.

Not many clients will walk into a professional advisor’s office and identify their need for asset protection during a future period of vulnerability, however such an advisor should be able to put together the best asset protection model for each client’s needs, taking into account the need to balance control with protection.

The attorneys in the Trust & Estates Practice Group at Yedid & Zeitoune have a combined 16 years of legal experience.

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