Tuesday, 14 June 2016 23:41

What Does Medicare Cover?

What Does Medicare Cover?

 

What is Medicare?  What does Medicare cover?

I can’t possibly tell you everything you want to know about Medicare, or all of the options.  What I can do is provide a bit of a birds-eye view or summary about some of the pertinent parts of Medicare and how it relates to estate planning and long-term care.

 

The program is available to most people over 65 years old.  Medicare covers medical expenses, hospital care, and post-hospital care.  It also provides some coverage for prescription drugs under “Part D”.

 

Medical expenses:

Medicare covers 80 percent of approved qualified medical expenses and includes things like doctors and surgical services.

 

Hospital Care:

Hospitalization is covered for 90 days per “spell of illness” with a deductible for the first 60 days, and a co-payment of $315 per day for the remaining 30 days.

 

Post-hospital skilled nursing home care:

If the hospital stay is at least 3 days, and only of the post-hospital care needed is “skilled care”, Medicare will cover 100% of the costs for the first 20 days, and a co-pay of $157.50 per day for the next 80 days for a maximum of 100 days of care.  Availability is very limited. 

 

Does Medicare Cover Long-Term Care?

No, Medicare does not cover long-term care.  As described above, Medicare only provides some home care and it must be under very specific situations. 

 

Other Medicare aspects include (but are not limited to):

  • There are “gaps”, and private policies can be purchased to fill these gaps.  These are “Medigap” plans. 
  • Medicare doesn’t cover hospital costs beyond 150 days
  • Medicare doesn’t cover skilled nursing home costs beyond 100 days
  • Medicare doesn’t cover ANY custodial nursing home care or non-skilled home health care

 

Medicare Part D

Medicare Part D is an optional prescription drug coverage.  It is automatic in certain situations for certain people on Medicaid and others.  There are some co-pay rules and many twists and turns that I won’t get into here.   The enrolment period is 3 months prior to, and up to 3 months after your 65th birthday.  A person can only change their plan once a year.  There are also many different plans from which to choose that I won’t get into in this (or likely any) blog.  I simply wanted to provide a general background into Medicare.

 

Please feel free to give me a call today and we can review your situation and other Estate Planning goals.  Everyone’s situation is different, and I can help create solutions. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

William Daniel Powell (Dan)

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

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What is the difference between Medicare, Medicaid, and Medi-Cal?

In a Nutshell

In a nutshell, Medicare is a federal program that provides basic health insurance and prescription coverage to those 65 years of age and up, or those under 65 years old that are eligible for Social Security Disability benefits.  Medicare does not pay for long-term care.  Some skilled care is provided for a short time and if certain requirements are met, but it is not the norm.

 

Medicaid is a federal and state program that provides health care coverage for persons of all ages if they have a low income and limited resources.  The definition used is that Medicaid is a government insurance program for persons of all ages whose income and resources are insufficient to pay for health care.  Therefore, if you make over a certain amount of money, you won’t qualify for Medicaid.  Medicaid pays medical costs and long-term care costs.  Medicaid also has a right to seek reimbursement from the decedents estate for long-term care, and also for medical care costs.  There are several rules and circumstances involved, and will be discussed in another one of my blogs.

 

 

Medi-Cal is also a program that provides care to persons with low income and limited resources. It is what the federal Medicaid program is called in California, and is therefore essentially the same thing. 

 

 

All of these programs will be discussed in more detail in my blog posts.

 

Please feel free to give me a call today and we can review your situation and other Estate Planning goals.  Everyone’s situation is different, and I can help create solutions. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

William Daniel Powell (Dan)

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

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ILIT Trusts – Do I give the Policy Proceeds Outright, or in Trust?

 

So doesn’t a life insurance policy usually just pay a lump sum to the beneficiary?  The answer is yes unless the beneficiary is a minor.  If that is the case, the UTMA (Uniform Transfer to Minors Act) or a guardian will need to be appointed which costs time and money.  The guardian will have to control the assets and administer the proceeds until the minor reaches the age of majority.  A lump sum can also be thought of as an outright gift because there is no control or restrictions.

 

Outright, or in Trust?

Outright gifts can present a variety of problems such as:

  • If the beneficiary receives means tested public benefits such as Medicaid or SSI (Supplemental Security Income), the outright gift may put the receiving of these benefits in jeopardy.
  • If the beneficiary of an outright gift is a minor, a guardian will have to be appointed (if one is not already in place) by a court which takes time and costs money.
  • An outright gift can be dangerous if the beneficiary has a substance abuse problem.
  • A lump sum gift may not be the best to protect the beneficiary from a bad marriage, creditors, or predators.
  • Even one that is good with money may experience problems if given a large sum of money all at once.

 

For these reasons alone a gift given in a Trust is preferable.  A Trust (a Revocable Trust or an Irrevocable Trust) can control or guide the proceeds and provide very little control, to a high level of control. 

 

An ILIT (Irrevocable Life Insurance Trust) can be structured just like a Revocable Living Trust in how the proceeds are to be given to the beneficiaries.  The Trust can provide no guidance or control, or the Trust can provide a lot of guidance and control over the distribution of the proceeds. 

 

Please see my Blog for continued discussion of various aspects of ILIT Trusts.

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

Please feel free to give me a call and we can establish your Living Revocable Trust, ILIT, or other Estate Planning goals today.  If you have specific estate planning objectives, I can help create solutions to achieve your specific purpose. 

 

Thanks for reading my blog.

 

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

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The Longevity Risk – Don’t Outlive Your Money, and Leave Some for the Kids.

What is the Longevity Risk?

God willing you and I will have this “problem” and live to be very old, but without the need for a lot of personal care.  The Longevity Risk is the costs associated with living to be old.  Although old age isn’t as much a prerequisite as is failing health and the need for some – or constant care. 

 

 

Why does the Need for Living Assistance Create a Risk?

Living assistance costs money, plain and simple.  Having a person come into your home and help with some of the tasks depends on the level of care and skill required and a bit on the area you live in.  We here in San Diego know that things tend to be a bit more expensive than other places.  Modestly, however, I think the costs of having someone help with tasks such as bathing, cleaning, dressing, etc. can cost several thousand dollars a month.  That adds up over time.  If you need to go into a full or even a part-time assisted living facility, you can be looking at $5000 to $6000 a month and more if even more care is required.

  

Am I going to be at Risk of Losing all my Kids Inheritance?

Statistics show that the over 65-year-old segment of our population is predicted to grow by about 147% from the year 2000 to 2050, while the rest of the population will only grow by about 49%.  That means the senior-citizen segment of our population is growing, and growing fast.  Moreover, statistically we are all living longer than ever before.  The longer we live, the higher the likelihood that we will need some degree of care in our senior years. 

 

If we end up needing assistance with our day-to-day living, it is quite possible that we will end up using all of our assets, and potentially living our final years in poverty.  Not a very happy ending.  I can help.

  

You Have Choices

There are choices available to most of us.  Call me and let’s discuss options and we will see if we can keep the golden years golden.

 

Please see my Blog for more discussion on the topic of planning for the elderly and asset protection.

 

Please feel free to give me a call and we can establish your Living Revocable Trust, ILIT, or other Estate Planning goals today.  If you have specific estate planning objectives, I can help create solutions to achieve your specific purpose. 

 

See lots of estate planning information on my website at: www.myestate-plan.com 

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

ILIT Trusts – Keeping the Proceeds out of the Insured Estate for Federal Estate Tax Purposes

 

 

Do Life Insurance Proceeds get Included in my Estate for Death Taxes?

 

What are Death Taxes?  For the purpose of federal tax, the is something called federal estate tax exclusion and it is adjusted, or indexed, for inflation.  In 2016 the federal estate tax exclusion is $5.45 million dollars for an individual, and $10.9 million dollars for a couple.  That means that an individual dying in 2016 with an estate valued at less than $5,450,000 dollars will not owe any federal estate tax.

 

So how do we determine what is includable in the decedents estate for federal estate tax?  Let’s leave that for another discussion.  Suffice it to say that generally life insurance IS includible in the insured’s estate for death tax purposes.  Even an Irrevocable Life Insurance Trust (ILIT) may be included in the insured’s estate.  An ILIT is used expressly TO keep the proceeds out of the insured’s estate, so what gives?  Well, if the Irrevocable Trust is poorly drafted or managed, the proceeds may be included.  Also, if the insured gratuitously transfers all the rights in the policy within three years of his or her death, the Internal Revenue Service code section 2035(a) makes the proceeds includible in the decedent’s estate for federal estate tax purposes.   The reason is the way the IRS sees it is that the gift was made “in contemplation of death”, and therefore is disallowed. 

 

 

Does an ILIT’s proceeds get included in my Estate for Death Taxes?

 

The purpose of an Irrevocable Life Insurance Trust is to keep the proceeds out of the insured’s estate for federal estate tax.  This is achievable if the above criterion is met (policy not transferred within three years of the insured death), and certain other criteria is also met.  One of these is that the insured must not require that the beneficiary use the proceeds to pay obligations of the estate such as taxes.  Another is that the insured must not possess “incidents of ownership”.

 

 

What are Incidents of Ownership?

 

Incidents of ownership means the power of the insured or his or her estate to control the proceeds of the policy, the power to change beneficiaries, to assign the policy, to borrow or loan from the policy, and others. 

 

So, as you can see there are many restrictions and requirements in how the Trust is drafted, and how it is maintained in order for this ILIT Irrevocable Trust to function as intended.   Consult an attorney like me for your Estate Planning needs to help insure a proper outcome. 

 

 

Please see my Blog for continued discussion of various aspects of ILIT Trusts.

 

 

Please feel free to give me a call and we can establish your Living Revocable Trust, ILIT, or other Estate Planning goals today.  If you have specific estate planning objectives, I can help create solutions to achieve your specific purpose. 

 

See lots of estate planning information on my website at: www.myestate-plan.com 

 

Thanks for reading my blog.

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

Monday, 09 May 2016 22:41

An Overview of ILIT Trusts Part Two

Advanced Estate Planning – An Overview of ILIT Trusts – Part Two

  

How does an ILIT (Irrevocable Life Insurance Trust) work?

 

First things first – we need to create an Irrevocable Life Insurance Trust.  Even though after all the steps are performed, and you cannot change the Trust, the good news is that you have a good amount of control in creating the Trust at the beginning.  You can pick who will serve as the Trustee (the Trust manager), and decide how much control you will build into the Irrevocable Trust in managing the distribution of the benefits.  The next step is to acquire a life insurance policy for the Trust to hold with the Trustor (the Trust creator, you) as the insured and the Trust as the owner.  The insurance premiums will be paid by the Irrevocable Trust in a special way.  You will make transfers to the Trust and utilize your annual gift tax exclusion further reducing your potential federal estate tax exposure (please see my blog here for a discussion of Federal Estate Tax: how much is federal estate tax ).  The Trustee of the Irrevocable Trust will tell the beneficiaries that they can withdraw the money if they so choose via something called Crummey Letters.  The beneficiaries would rather keep the insurance policy in place and choose not to withdraw the money.  The Trustee then pays the policy premium.

 

There are many restrictions and requirements in how the Trust is drafted, and how it is maintained in order for this Irrevocable Trust to function as intended.   Please see my Blog for continued discussion of various aspects of ILIT Trusts.

 

Please feel free to give me a call and we can establish your Living Revocable Trust, ILIT, or other Estate Planning goals today.  If you have specific estate planning objectives, I can help create solutions to achieve your specific purpose. 

 

See lots of estate planning information on my website at: www.myestate-plan.com 

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

Advanced Estate Planning – An Overview to ILIT Trusts

 

What is a Trust?

As discussed in my other Blog posts, a Trust is a means of passing property to other persons.  A Trust is an advantageous method of passing property for several reasons.  With a Trust, you can help yourself in planning for your potential incapacity.  Also, with a Trust, you can better control how your beneficiaries receive what you leave them and can help protect those you choose as beneficiaries from bad marriages, predators, and the like.  Trusts don’t need to go through Probate and therefore save time and money.  A Trust – be it a Revocable Living Trust, or Irrevocable Trust – is a private document where a Will becomes public record when Probate is opened. 

 

 

What is an ILIT?

 

ILIT stands for Irrevocable Life Insurance Trust.  An Irrevocable Trust is just that – Irrevocable and thus not able to be changed like a Living Revocable Trust can be.  Sounds kind of scary and final doesn’t it?  Well, there are great reasons to use an Irrevocable Trust.  One reason to use an Irrevocable Trust is to create a Special Needs Trust to protect means tested public benefits like Supplemental Security Income (or SSI), or Medicaid and others.  Another great use of an Irrevocable Trust is to create an ILIT or Irrevocable Life Insurance Trust – the subject of this blog. 

 

An ILIT is typically used as an advanced estate planning technique.  When a person wishes to leave money to a person, but is either over the federal estate tax exemption amount (in 2016 it is $5.45 million for an individual, and $10.9 million for a couple), or close to reaching the federal estate tax exemption amount, the use of an ILIT is a great option.  The reason it is a great option is because properly structured, an Irrevocable Life Insurance Trust means that the proceeds of the life insurance are not includable in the insured’s estate for federal estate tax purposes.  Therefore, tax savings are realized.

 

 

How does an ILIT (Irrevocable Life Insurance Trust) work?

 

For the rest of the explanation of ILIT Trusts and how they work, please see Part 2 of this Blog.  Thank you.

 

See lots of estate planning information on my website at: www.myestate-plan.com 

Please feel free to give me a call and we can establish your Living Revocable Trust, ILIT, or other Estate Planning goals today.  If you have specific estate planning objectives, I can help create solutions to achieve your specific purpose. 

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

Wednesday, 04 May 2016 23:35

Advanced Estate Planning Overview

Advanced Estate Planning – An Overview

 

What Do You Think of When I Say Advanced Estate Planning?

 

Some people think advanced estate planning is just for the rich or wealthy.  Well, it’s not quite that easy.  Certainly there are advanced wealth transfer techniques that are available to high net-worth persons.  One of the easiest estate plan situations is a single person, never married, one or two beneficiaries, and a relatively small estate (under the federal estate tax exemption).  Things tend to get a bit more advanced as situations and goals get more complicated.  Planning can get a bit more complicated when a people with children from prior relationships marry and create the so-called “blended family”.  Often in these circumstances, each partner wants to make sure that their kids don’t get cut out of the estate should they be the first to pass away.  Another way things can get complicated is with an intricate and detailed distribution structure.

 

 

Life Insurance for Advanced Estate Planning

 

A wonderful technique for estate planning is the use of life insurance.  On one extreme, life insurance can be used in high net-worth estates to pay estate taxes.  On the other side, life insurance can be used to create the estate itself.  For a young parent or young family, life insurance may be the best way to make sure the kids or family is taken care of in the event that the primary money earner passes away or becomes incapacitated.  In most families today, both spouses work and may be equal money earners.  Even in this situation, the use of life insurance is advisable because maintaining the lifestyle on only one salary can be difficult or impossible.  Aside from lifestyle, there are other expenses life insurance can provide for such as college expenses, weddings, and the like.

 

Advanced techniques will be discussed here in my blog.  These techniques include:

  • The use of life insurance in Estate Planning
  • A/B Trust or Bypass Trust
  • Trusts for couples where one spouse is not a U.S. citizen
  • Using the Unlimited Marital Deduction
  • Using the Federal Estate Tax Exemption
  • Utilizing the yearly gift exclusion amount
  • Plus more

 

Please feel free to give me a call and we can establish your Living Revocable Trust or other estate planning objectives today.  If you have specific estate planning goals, I can help create solutions you may not be aware of. 

 

See lots of estate planning information on my website at: www.myestate-plan.com 

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

Saturday, 23 April 2016 22:55

A Gift Given Outright, or in Trust?

Outright Gifts Versus Gifts in Trust

 

In this blog we will be talking about the advantages and the disadvantages of giving a gift outright versus a gift given in Trust.  Generally speaking, a gift given in Trust is the preferred method because of the protection a Trust can provide.

 

 

Outright Gift

 

What is an Outright Gift?  This is a gift that is given to another with no strings attached so-to-speak.  A simple Will that gives a person (a beneficiary) something does so “Outright”.  A Will that does not create a Trust (called a Testamentary Trust) cannot control how the gift is used, how long it is to be held, or provide any protection to the beneficiary from predators, bad marriages, creditors, or even from the beneficiary her or himself.  The donee (the person that receives a gift) is free to do whatever they like with an outright gift the moment they receive it.  Some donors cringe at the thought of one (or more) of their kids getting a large gift at a young age for fear of squandering the gift.  The older we get, the older we think our kids should be before they get such a large gift also!  Aside from that concern, or even if you don’t have such a concern, there is another reason to use a Trust to distribute a gift.  I heard a story once of a responsible donee that received a gift of money from his parents.  He put the money in his account and just used it over the years for various reasons.  Much later on reflection, he wished his mother had said something like “it is my wish that you use this money for memorable occasions such as vacations, or even gifts to one another.”  This way every time he spent the money, or remembered the vacation, he would have thought of mom also.  That’s a pretty nice thought.  That shows love and caring in my book.

 

 

Gifts Given in a Trust

 

So now let’s talk about what it means to give a gift in Trust.  This is the most flexible way to give a gift to another person.  A gift given in Trust can be outright, even though it is given in Trust, and on the other side of the spectrum, a gift in trust can be held by the Trustee (someone other than the Beneficiary) and distributed to the Beneficiary at the discretion of the Trustee.  This provides the most protection for the Beneficiary. 

 

For more on protecting the Beneficiary’s inheritance, please see my blog here:

protecting the Beneficiary’s inheritance

 

So because of the protection that a Trust provides, and because we can provide guidance – from mild to extensive – giving items in Trust is the preferred method of distributing our assets to the next generation.

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

I am never too busy to help, and I do my best to answer my phone every time it rings.  Call me and let’s get your Estate Plan together to get you the peace of mind it provides.

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

 

Asset Protection Planning for your Beneficiaries Part 2

 

How Do I Love You?  Let Me Show the Ways

 

How many ways are there to distribute an inheritance?  Basically there are two ways: outright, and in Trust. 

 

An outright gift provides no protection, and no direction.  Now, if you have a beneficiary that is absolutely fantastic with handling money, and you have no concerns about creditors, predators, divorce, the possibility of losing means tested public benefits such as Medi-Cal or SSI, or concerns about the beneficiary’s own self-destructive tendencies, then outright is likely the best choice. 

 

The second method of distributing an inheritance is in Trust.  Here, by using a Trust-style distribution, is where we have many options from which to choose.  A Trust can be designed to provide a lot of protection, to very little protection and control. 

 

Something to keep in mind is that in creating your Trust during the estate planning process, you can provide better asset protection than any type of asset protection the beneficiary can design for themselves if they were to receive the inheritance outright, and for far less cost.

 

 

Degrees of Protection Various Trusts Provide

 

Starting from one side of the spectrum, a Trust can be created that provides no protection from creditors or predators.  These types of Trusts are usually called an Unlimited Demand Right Trust.  So why choose such a Trust?  Because it does provide some other benefits that a Settlor may find desirable.  For example, what if the beneficiary does no estate planning of their own?  Well, in California, the Probate court steps in and California gets to decide.  I don’t know about you, but I don’t want the Probate court making my decisions for me.  Another benefit is that every time the beneficiary does a distribution, they are likely thinking about the people that gave them the gift in the first place.  They may even treat the money with more respect if they think they are spending “mom’s money” instead of their own.  Moreover, as the Settlor, you can provide precatory guidelines for how you would like the property dealt with or spent.  Because the guidelines are precatory (wishes) they are not a means of enforceable control.  Another benefit to this type of Trust is that the Beneficiary can withdraw all of the property from the Trust if he or she so desires.  So if the Beneficiary has some emergency or urgent need, he or she has access to all of the funds.  However, if the Beneficiary leave the money wherever it sits, they would not commingle the money with a spouse like they might if given the distribution outright.  So this type of Trust does provide some divorce protection.  California is a Community Property state, and income is generally presumed to be community property (half is the property of the wife, and half is the husband’s).  Gifts from bequest, devise, and descent is the receiving spouse’s separate property.  However, if money is commingled, it can be difficult, expensive, and perhaps impossible to prove how much if any remains separate property should a divorce occur.  No fun to think about, but things happen.

 

At the other side of the spectrum is the Totally Discretionary Trust which provides just about the maximum amount of asset protection.  With a Trust of this kind, the income is distributed by an independent Trustee (a person other than the Beneficiary) totally at the Trustee’s discretion.  Because of this, and other aspects that are built into the Trust, Creditors cannot force the Trustee to make a payment to the Beneficiary because it is not an asset of his or hers.  The chance of undue influence on a weak Beneficiary is also reduced again because the Trustee cannot force a distribution, therefore predator protection is greatly increased. 

 

Keep in mind that there are possibilities in-between that can be used to customize the level of protection you wish to provide.  It is certainly not a choice of either an Unlimited Demand Right Trust, or a Totally Discretionary Trust. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

My most important job is to listen to your wishes then suggest solutions.  Call today and let’s start planning!

Thanks for reading!

 

Dan Powell

1-619-980-2297

 

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

 

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