Mar 08, 2013
By Rick Law, Elder Care Attorney Focusing On Seniors In Aurora, Illinois
Many times, we get a call from an adult child who has just been told that his or her elderly parent needs long-term care in a facility. The child will tell us, “My mom has a trust, so everything is protected.” We have to ask,“Is it a revocable living trust?”
The answer often comes back quickly, “Yes.”
The person on the other end of the phone is thinking that all is well. We have to then inform them that the trust is completely available to be spent down on care for the parent.
Sometimes, the child is confused: “But doesn’t the trust protect the assets?”
Sometimes the child is angry: “The lawyer said this would protect Mom’s assets!”
Sometimes we hear denial: “No, that just can’t be right.”
The problem is that not all trusts are alike. When you hear the word “trust,” you think it sounds like a good word. What the parent has in this case is what we refer to as “the open box”. This means that at any time, the trustmaker can reach into the open box (the trust), take out money, and spend it on whatever they want. But if they can reach into the open box and spend the income and assets, so can creditors (which would include a long-term care facility). All the assets are available for medical expenses of the person who created the trust and has had control of the trust.
Some trusts are referred to as “revocable living trusts,” meaning they can be revoked or amended. The money in them can be used for the trustmaker’s healthcare costs, education costs, maintenance expenses, and support; we call this the “HEMS” standard.
People most commonly are told they should get a trust to avoid probate. Revocable living trusts do avoid probate if properly funded, but they are not asset-protection trusts.
Does the parent have a trust? Yes.
Will they avoid probate at death? It depends.
Are the assets in the trust protected against being spent down on care? No. That would be an entirely different type of trust. In general, trusts that “protect” assets are referred to as “irrevocable trusts,” and even these trusts are not all the same.
Too many families needlessly lose everything they have. Don’t let that be you. If you need help building a fortress around your estate to protect it from creditors, predators, and the cost of chronic disease, give our office a call at 800-310-3100. Your first consultation is absolutely free. We’ll let you know what steps you need to take, right now, to protect yourself and your family. Call now, because when you’re out of money, you’re out of options!
Rick L. Law, Attorney, Estate Planner for Retirees.
Rick was named the #1 Illinois elder law estate planning attorney by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine, TheStreet.com, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future. Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care. Appointments available in Chicago, Aurora, Oak Brook, Schaumburg, and Joliet. Call 800-310-3100 for your free consultation now!
“Everyone in the office was absolutely wonderful to work with whether on the initial set-up of the trust, adjustment to such following my father’s passing, or processing of his home sale and proceeds.
They genuinely care for your family’s well-being and walk you through each step of the process. They are also exceptionally responsive even when parties involved live in different locations.
This is a definitely a team you can trust and one I highly recommend.”
W.W., Client of Law Hesselbaum