It’s an unfortunate fact that seniors can be prime targets for financial abuse and scams. Sadly, the elderly are often taken advantage of by strangers — and sometimes even their own family members. That’s why it’s important that planning is in place to help seniors protect themselves and their assets.
As we age, it can become increasingly difficult to manage our assets. Most of us will, at some point, need assistance with these details to help ensure that our financial and other assets aren’t depleted. If you or an aging loved one are looking for ways to safeguard assets, a Living Trust is often the best way to do so. Living Trusts allow seniors to rest assured that their finances and assets are managed by a trusted person.
What is a Living Trust?
Living Trusts help protect and manage the assets of those who cannot do so themselves due to age, illness, or disability. Many seniors assume that a will is the only protection they need. However, trusts are designed to safeguard the assets of the living, while wills only outline what happens to a person’s assets when they pass away. Furthermore, wills must go before a probate court and taxes may need to be paid on inheritances, while Living Trusts allow beneficiaries to avoid probate after their loved one’s passing.
To establish a Living Trust the owner, or grantor, places assets within the trust. The grantor then appoints a trustee to manage it and names beneficiaries to receive the assets of the trust when the time comes.
There are different types of Living Trusts. They are each described below.
A Testamentary Trust protects an elderly person’s assets when a spouse dies. Assets of the deceased are transferred into a trust — enabling the appointed trustee to make all financial decisions regarding those assets. This helps a surviving spouse by protecting him or her from fraud or mismanagement of assets. Trustees can help the surviving senior generate income from remaining assets via sales or investments and take advantage of tax benefits.
Revocable Living Trusts
A Revocable Living Trust safeguards seniors by making it more difficult for non-trustee family members to mismanage money or assets. The grantor (senior) can amend or revoke the trust at his or her own discretion without the consent of the beneficiary. This type of trust allows the grantor to stay in control of assets by either serving as a trustee or appointing one. In this case the grantor, serving as trustee and beneficiary of the trust, appoints a successor in the event he or she becomes incapacitated or dies. This appointed person is then responsible for disposal of the trust’s assets.
Irrevocable Living Trusts
An Irrevocable Living Trust is one that cannot be changed or revoked by the trustmaker. This means that the grantor/trustmaker gives up his or her rights to the assets once they are transferred. Seniors over 65 who are eligible for MaineCare often choose to transfer assets into an Irrevocable Living Trust to avoid having to dispose of assets in order to remain eligible for MaineCare coverage or long-term care benefits. Once assets are in an irrevocable trust, they cannot be counted for MainCare eligibility purposes, but there could be a penalty for transferring assets to an irrevocable trust.
An elder law attorney can assist in determining the best way to set up this type of trust and how to best transfer assets based on MaineCare stipulations. An Irrevocable Living Trust can provide income for seniors and their spouses. It also protects their property and other assets from being seized to pay for medical costs, without impacting MaineCare eligibility. This type of trust can also remain in place for a surviving spouse after the grantor’s death.
The sooner assets are placed in an Irrevocable Living Trust the better, as a penalty will be assessed by MaineCare during the first 5 years the trust is in existence (if MaineCare benefits are received during that time period).
Ultimately, Living Trusts give seniors more control over their assets than a will, allowing them to set parameters and stipulations and appoint a trusted advisor to help them make decisions. If you or your loved one would like more information about setting up a Living Trust, we can help. Contact Skelton, Taintor & Abbott today to discuss how we can tailor a trust to your specific situation and needs.
This article is not legal advice but should be considered as general guidance in the area of elder law. You can contact us at 207.784.3200. Skelton Taintor & Abbott is a full service law firm providing legal services to individuals, companies, and municipalities throughout Maine. It has been in operation since its founding in 1853.