Posts Tagged ‘Maine trust’

Second marriages: what if your spouse requires expensive long term care?

Friday, July 12th, 2013

By Sally Wagley, Maine elder law and estate attorney

We have had a number of clients, either divorced or widowed, become happily married later in life. Sadly, after a number of years of love and companionship, one of them may start to decline and need expensive care in a nursing home or assisted living facility. For purposes of discussion, we’ll assume that the husband is the one who needs institutional care, with the wife remaining at home. The wife may find out to her chagrine that she is expected to use her own assets — accumulated by her before the marriage from a lifetime of work –on her husband’s nursing home costs. She may find out that after he has depleted his own funds, he will not qualify for state assistance through Maine’s Medicaid program (called MaineCare) until she has spent down her own funds to a certain point. This causes her great anxiety, for two reasons: most important, she wants to make sure that she has enough to live comfortably for the rest of her life; in addition, she may want to be able to pass on assets to her own children.

What can a couple do in this situation? Advance planning, while both are still healthy, is the best option. If they qualify for and can afford long term care insurance, that will make it less likely that the wife will have to spend down her own savings. Another option is an irrevocable trust, whereby the wife places some of her own assets into an irrevocable trust, naming one or more of her children as trustees. She gives up control of the principal in the trust but will receive income from it. In this way, she can put some of her assets off limits for purposes of her husband’s possible future long term care expenses. In order for her to safely do this, however, she must feel reasonably confident that neither she nor her husband will need long term care in the next five years, as MaineCare has a “five-year look-back” rule which penalizes people who transfer assets in order to qualify for MaineCare.

For a couple who is already in crisis, there are still options. The spouse may purchase a certain type of annuity which meets the requirements of the law. This annuity will protect her assets while providing a stream of income. She can invest her countable assets into exempt assets, such as repairs or improvements to her home, or the purchase of a newer car.

As a last resort, some spouses choose to divorce for the purpose of preserving assets. This is a wrenching decision for most clients, but may be the only option for ensuring that the spouse at home to preserve what she has worked so hard for over the years. This divorce, however, will not prevent the wife from continuing to provide love, companionship and care to her husband, just as if they continued to be married.

Using a trust or LLC to keep your vacation home in the family

Tuesday, February 8th, 2011

Here in Maine (“Vacationland”), one of our favorite activities is going “up to camp.”  People treasure their waterfront property and hope that it will remain in the family for generations.   While it is impossible to control the future from your grave, you can increase the chances of the property staying in the family by placing the property in a trust or a limited liability company (LLC). Such an arrangement typically provides:


  • Who will make decisions about the property. If you use a trust, the decision maker(s) will be called “trustees” if you use a trust.  You might appoint one of your children as trustees, or perhaps all of them, to act as a group.
  • The arrangement will state how decisions are to be made about the property: Will one person make decisions unilaterally?  Or will decisions be made by a group, by majority vote?
  • Who will pay property taxes, insurance, utilities and maintenance?  Will it be shared by all members of the family who get to use it?  What if one person can’t afford these expenses?
  • How will a schedule be arrived at, enabling different family members to use the property?
  • What if one of the beneficiaries isn’t using the property much and wants out of the arrangement?  Will other beneficiaries be required to buy him or her out? If so, how will they decide on a price?
  • What happens if a beneficiary dies?  Does that beneficiary’s share go to the other beneficiaries?  Or does it go to the deceased beneficiary’s children?

Families are often tempted to develop such an arrangement informally.  However, this type of arrangement is complex, requiring the consideration of many possible scenarios as well as tax considerations.  Therefore, it is essential to consult an attorney before deciding to go in this direction.  

 

Sally M. Wagley assists older and disabled people and their families in the areas of elder law,  estate planning and estate administration with the firm of Levey and Wagley, P.A. in Winthrop, Maine. Go to www.leveyandwagley.com.   

Using a Revocable Living Trust to Avoid Probate

Tuesday, December 28th, 2010

“Probate” – a word that creates fear and dread in the hearts of many. (For more information on what “probate” is, see my previous blog, “What is Probate?”)  But the truth is:  While the probate process in some other states is complex, time consuming and expensive, Maine has a streamlined probate process which for most people is relatively fast and is no more expensive than alternatives to probate.

 Reasons to avoid probate.  Nevertheless, in some instances, it can make sense to make arrangements to avoid probate.  This is true if: 

  • You have real estate outside of Maine; or
  • You have concerns about privacy and want to keep the details of your estate plan private.

 Ways to avoid probate. A number of simple ways can be used to avoid probate, such as: 

  • Putting real estate, bank accounts and investment accounts in joint names;
  • Designating beneficiaries on investment accounts, retirement plans, annuities and life insurance; 
  • Using “transfer on death” designations (“TOD” or “POD”) on accounts.

 Using a Revocable Living Trust to avoid probate. A “revocable living trust” may also be part of a plan to avoid probate.   This is done as follows:   A lawyer writes up a trust document.   Under this document, you name yourself as trustee. This means that during your life, and for as long as you are mentally competent, you remain in control of your assets.  You are able to add assets to or remove assets from the trust, spend money from it, change the terms of the trust, or revoke the trust altogether. You also name a “successor trustee”:  a trusted person (such as a family member or bank) to take charge of the assets when you die, or possibly sooner, if you become mentally incompetent.  When you die, the successor trustee pays bills and then distributes money and property according to the directions in the trust document, to the people you name in the document and in the amounts directed by you.  This can all be done without anyone having to file papers in the probate court. This preserves your privacy.  And if you have real estate outside of Maine, it avoids the necessity of filing for probate in another state, which can indeed be expensive.

 When considering whether to have a trust of this type prepared, be aware that the fees will be higher than if you go with a simple will.  This is because, in addition to the drafting of the trust document, deeds must be prepared, transferring your home and other real estate to the trust. Your bank and investment accounts will also need to be transferred to the trust, and beneficiaries will need to be changed on your retirement plans and life insurance.    This will all require more time on the part of your attorney, for which you should expect to be billed. 

(This blog is by attorney Sally M. Wagley, a Maine elder law attorney with the firm of Levey & Wagley, P.A., in Winthrop, Maine.  The information provided on this website is for informational and educational purposes only.   This information should not be construed as rendering legal advice or offering an answer to a specific legal problem.)

A Trust for a Minor or Young Adult Child

Monday, October 11th, 2010

If you have a minor child or a child in the late teens or early twenties, you should consider leaving your child’s inheritance to a trust, rather than to your child outright. Why? 

  • The establishment of a trust will avoid the necessity of having a court appoint a conservator for a child under age 18.  (Even the child’s surviving parent or guardian will be required to have to seek appointment as conservator before funds can be distributed from your estate and used for your child’s benefit.  This is required by law, and will take time and money)
  • A trust will prevent your child’s receiving his or her inheritance at age 18.  Even responsible children in this age group can make impulsive financial decisions.  The placement of the funds under the control of a trustee will ensure that your child’s inheritance is responsibly managed until your child is ready to do this on his or her own.
  • A trust will enable you to choose a reliable person to act as trustee for your child.  It is not necessary that it be a bank or trust company:  you can choose a family member or friend.
  • A trust can direct what types of things your child’s inheritance can spent on, such as college or vocational training. 

A trust of this type need not be expensive or complicated.   The trust can be relatively simple and made part of your will.  It is not necessary to place funds in the trust now.  Rather, funds (or other assets) will go into the trust upon your death.  

I have prepared many hundreds of these trusts for clients with children who are minors or young adults.   Typically the trust directs the trustee to use funds for the child’s health, education and support until the child reaches age 19 or graduates from high school.  Thereafter, the trustee is directed to use the funds for college of other post-secondary education, as well as living expenses if the child is enrolled full time.    Most clients choose to have the trust end, and the child’s inheritance released to the child, at age 25.  (I had one very protective mother insist that her son should not get his full inheritance from the trustee until age 50, which I thought was a bit much.)  Other clients direct the trustee to distribute income from the trust investments automatically over a period of years, as well as installments of principal from time to time. 

However, the terms of the trust are entirely up to you, and can be tailored to fit your situation and your goals for your child.

Trusts 101

Tuesday, October 5th, 2010

Clients frequently come into my law office asking “Should I (or we) have a trust?”  My answer is always “It depends on your situation and what your goals are.” 

Then I ask clients, “What are your goals?   What are the concerns you have that make you think about having a trust?”   These concerns may include:

  • Providing for a minor or young adult child
  • Providing for a disabled person
  • Providing for a pet
  • Avoiding probate
  • Minimizing estate tax
  • Preserving your assets against the high cost of nursing home care
  • Keeping your vacation home in the family.

There are many different types of trusts, for many different purposes:

  • A trust for a minor or young adult child;
  • A “special needs trust” for a disabled person;
  • A trust for the care of an animal;
  • A revocable living trust, to avoid probate;
  • A tax-oriented trust, to reduce estate taxes;
  • A trust to preserving your assets against the high cost of nursing home care;
  • A trust to hold your vacation home for the benefit of your family.

In the coming weeks, I will write about different types of trusts which can be useful depending on the client’s situation. Later this week:  Trusts for minor or young adult children.

 


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