Estate planning is the necessary steps taken during your lifetime to put into place the documents required to make sure that your financial affairs are in order and health care wishes will be honored, and that loved ones are provided for upon your passing.
Fundamental Estate Planning Documents Should Include:
- Will with Asset Protection Trust
- Trusts
- Special and Supplemental Needs Trust
- Revocable Living Trust
- Durable Powers Of Attorney – for Finances
- Durable Powers Of Attorney – for Health Care
- Health Care Directive / Living Will
What Is a Will with An Asset Protection Trust?
A Will with an Asset Protection Trust protects assets for a surviving spouse or any beneficiary. To allow for flexibility, funding of the Trust can either be mandatory or contingent. If contingent, upon the death of the first spouse, a decision will be made at that time whether to protect assets through funding the Asset Protection Trust for the surviving spouse with the deceased spouse’s assets. Importantly, the Asset Protection Trust shields assets from unnecessary depletion. Assets in the Trust are not considered “countable” by Medicaid or other government needs-based benefit programs. Thus a Will with an Asset Protection Trust avoids depleting funds unnecessarily, and is especially useful if expensive Long-Term Care is needed by the surviving spouse. Couples can protect 50% to up to 100% of their estate from Long-Term Care expenses, creditors, and the State.
A Will with an Asset Protection Trust not only protects assets for the surviving spouse, but also for other beneficiaries should they need asset protection at the time they inherit. Furthermore, assets that remain in the trust ultimately will be distributed according to the wishes of the first spouse to pass, thus avoiding “unintentional disinheritance” of your beneficiaries due to unforeseen future events, such as remarriage.
What Are a Special Needs Trusts or Supplemental Needs Trusts?
“Special Needs” or “Supplemental Needs” describes any trust intended to provide benefits without causing the beneficiary to lose public benefits he or she may be entitled to receive.
When individuals with special needs who receive government needs-based benefits receive money from personal injury settlements, inheritances or other sources, they can lose their public benefits. You can structure your estate so that you provide assistance to your disabled child or grandchild without jeopardizing their receipt of benefits. This also can include a surviving spouse who may need Long-Term Care. Such a trust preserves those benefits and sets aside additional funds for the person with special needs. For a surviving spouse needing Long-Term Care, such a trust renders those assets non-countable for Medicaid qualification.
Does a “Supplemental Needs” Trust Differ from A “Special Needs” Trust?
It depends. Both terms can be interchangeable, and describe the purpose of the trust rather than being a limited legal term. However, the term “Special Needs” trust commonly is used to refer to a trust that a disabled person creates for themselves, or to a trust created for a disabled child. A “Supplemental Needs” trust often refers to a trust created by a third-person for someone, like a spouse or child, who would benefit from asset protection, though who would not be referred to as a person with “special needs”.
Does the Existence of A Special or Supplemental Needs Trust Qualify the Beneficiary for Public Benefits?
No. The existence of a Special or Supplemental Needs Trust does not itself make public benefits available. The beneficiary must meet eligibility criteria to qualify for the benefits program. If properly drafted and established, funds in the trust will not cause a loss of benefits.
Should I Choose a Revocable Living Trust?
A Revocable Living Trust is an arrangement for the management and distribution of your property. Such an arrangement is revocable during your lifetime. Your assets are transferred to the Trustee of the Revocable Living Trust, who manages and distributes the property according to the terms of the trust. The grantor/trustor, meaning the person who creates the trust, often serves as their own Trustee.
A Revocable Living Trust can be a good Estate Planning tool for those who own property in other states. However, unless it is properly funded and administered, upon the Trustor’s death there will need to be both a trust administration and a probate. A primary goal of a Revocable Living Trust is to avoid probate, especially in states such as California where probate is expensive and complicated – which is not the case in Washington.
Also, it is very important to understand that Revocable Living Trusts provide no Long-Term Care Medicaid planning benefit for a surviving spouse in Washington. In fact, Revocable Living Trusts can prove harmful to asset protection and Long-Term Care benefits planning in Washington. It is important to consult with an Elder Law attorney if you have or are considering a Revocable Living Trust.