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3 reasons older adults add trusts to their estate plans

On Behalf of | Nov 9, 2022 | Estate Planning

Estate planning is like getting immunizations. People recognize that it is important and even beneficial to do so, but they are averse to the process because they perceive it to be unpleasant. Once they complete the process, they may look back and realize it was not as bad as they had built it up to be in their minds.

Delaying estate planning is a very common mistake made by adults, and it is one that can lead to major family disputes or personal financial hardship later in life. Drafting a will is only part of the estate planning process. Many adults getting close to or past retirement age would also benefit from having a trust in their estate plan.

What are some of the reasons older adults add trust to their estate plans?

To qualify for Medicaid

It can be humbling to realize that your retirement savings won’t be enough to cover your cost of living expenses if you have to move into a nursing home. However, that is the exact realization that many older adults in New York reach every year.

Medicare won’t pay for nursing home costs, which means you will need to either find a way to pay with your own resources or qualify for Medicaid. Creating a trust to hold some of your more valuable assets will allow for faster Medicaid qualification when the time comes.

To protect assets from creditors

If you get Medicaid as you age, the state will potentially make a claim against your estate demanding the sale of your assets, including your home, until the estate has fully repaid the benefits you received.

As if that weren’t bad enough, your creditors, like a hospital, could bring a lawsuit against you while you are still alive to place a lien against or force the sale of some of your property. Moving assets into a trust before financial conflict arises will make it less likely that creditors can lay claim to those assets while you are alive or after you die.

To minimize tax liabilities

For those with an estate potentially worth millions of dollars, estate taxes become a concern. When the majority of someone’s valuable assets are held in a trust, those assets won’t contribute to the value of their estate and put them at risk of estate taxes, which could drastically reduce how much they have to leave for the next generation.

Understanding why some people add trust to their estate plans could help you determine if adding one would be smart given your circumstances.