Individuals who weather truly unusually life circumstances may need to put more thought into estate planning than those with basic needs. For example, wills are excellent tools for designating specific beneficiaries and appointing a guardian that someone trusts to support children after an adult’s passing. However, wills have many limitations that prevent them from fully serving the needs of those in more complex situations. Both family circumstances and financial issues may prompt someone to create a trust as part of a broader estate planning strategy.
Although trusts have long had an association with the extremely wealthy, they are increasingly popular among middle-class and even working-class testators. There are numerous reasons why people might consider adding a trust to their estate plans, including the three common concerns noted below.
To qualify for Medicaid later in life
Obtaining Pennsylvania Medicaid benefits can be a challenge even when someone lives on a fixed income. The state looks at current income levels and the total value of personal assets. There will also be a review of all major financial transfers within the last five years or 60 months before someone applies. Advance planning utilizing a trust can leave someone able to qualify for Medicaid later in life when they need long-term care.
To preserve their assets now and after their death
Those preparing to live on retirement savings and Social Security could eventually face a scenario in which they do not have adequate resources. Creditors might then try to take legal action against those individuals, possibly by seeking to place the lean against their personal property or security judgment against them. Those who create trusts can protect assets from creditor activity that could endanger their most valuable resources due to debt-related lawsuits as they age. They can also protect their loved ones from creditor claims against their estate that might force the sale of their assets.
To leave a lasting legacy
Whether someone wants to provide long-term support for loved ones that they can rely on year after year or to leave money for charitable causes, a trust can help them achieve those more complex wishes. Trusts provide more direct control over the utilization of assets and can be harder for dissatisfied family members to challenge in probate court.
Recognizing when a trust might be the right tool to accomplish someone’s estate planning wishes can help an individual to put together the best possible paperwork given their personal circumstances and intended legacy.