Trusts – Marketing machine or genuine estate planning tool?

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The minute I celebrated my 60th birthday, my mailbox filled with invitations for workshops and dinners about Social Security, estate planning, elder law, and Medicaid planning. As a seasoned elder law attorney, I worry about people without the benefit of my legal knowledge: Are they frightened by these ads, which are often more about selling financial products than protecting seniors?

Here are the top 10 things seniors need to know before creating a trust for the wrong reasons:

10. Unless your estate is worth more than $11.4 million ($22.8 million for a couple), don’t worry about heirs paying federal estate taxes. The New York state estate tax exemption is $5.74 million ($11.48 million for a couple).

9. If your estate is worth more than the current federal estate tax levels, you should find an attorney knowledgeable about tax planning for high net worth clients.

8. Under federal law, a living trust cannot protect you or your spouse from the costs of nursing care. Only trusts created by will can protect a surviving spouse. Medicaid planning and living trusts are incompatible. If anyone tells you a living trust will give you Medicaid protection, call me and I’ll explain.

7. If you own your home jointly with your spouse, it has crucial creditor protections in place and is an exempt asset for Medicaid eligibility purposes. If you transfer it to a living trust, it loses both its creditor protection and Medicaid exempt status. Don’t put your house in a trust without first meeting with an experienced elder law attorney.

6. Trust-marketing companies want you to believe that probate is something to fear and to avoid. Real reasons to avoid probate include a childless person with relatives spread out across the country, disinheriting a child, or a second marriage where there is no pre-nuptial agreement. In some states, the probate process is complex and micro-managed by the courts. For most people, especially those in Nassau or Suffolk Counties, probate is nothing to fear. Once the executor is appointed, there is no further court involvement. It is a process where a court decides that your will and estate plan comply with the law. That’s all. Medicaid and routine estate planning are not reasons to spend much money on avoiding probate.

5. Probate differs from estate administration, which you must do whether you have a will or a trust. Assets must be valued, debts paid, and distributions made to your beneficiaries. The cost of preparing a living trust is usually higher than preparing a comparable will.

4. Hard sell seminars presented by professionals you do not know about complicated trusts you don’t understand are never a good idea. Ideally, families should work with an estate planning attorney who can help them plan for their futures and incapacity.

3. Many kinds of trusts serve a variety of purposes. There’s no such thing as a “one-size-fits-all” trust. An estate planning professional needs to first understand your entire situation before making a recommendation if you need a trust and what kind of trust you need.

2. Many attorneys will give you a free consultation to discuss your goals before you hire them to work on your estate plan. That gives you a chance to meet with them, see how they work, and make sure you are both suited for each other.

  1. If a company solicits you with a hard sell, enjoy the dinner and walk away. Your estate plan, will, and legacy is too important to put at risk by a sales pitch.

Stephen J. Silverberg, Esq. is a nationally known estate tax and elder law attorney. You can learn more about him at www.sjslawpc.com.

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