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3 ways trusts can benefit middle-class adults who are planning an estate

On Behalf of | Nov 6, 2023 | Estate Planning

Discussion of trusts in an estate planning context often focus on wealthier households. Those who have enough resources to be at risk of estate taxes, for example, are likely to turn to more thorough estate planning measures to protect themselves and their beneficiaries.

Trusts absolutely have a role in minimizing tax obligations for those with multi-million dollar estates. However, they can also be very useful for individuals with more typical, middle-class resources. The following are some of the benefits associated with the use of a trust for a middle-class testator.

Easier Medicaid applications

People often use trusts to hold some of their most valuable assets. Houses, financial accounts and other high-value assets can fund a trust. Provided that someone plans at least 60 months or five years before applying for benefits, the transfer of their assets to a trust will usually make it easier for them to qualify for Medicaid if they need intensive support as they age.

Protection from collection activity

Those living on a fixed income later in life sometimes face creditor actions that could put their homes and other resources at risk. Provided that people transfer their assets to an irrevocable trust before becoming financially and solvent or facing collection activity, they can often shield the assets in the trust from creditor collection efforts. That protection can persist even after someone dies, eliminating the loss of assets to creditor claims in probate court.

Better legacy control

Someone who creates a trust can provide very specific instructions about how their beneficiaries will use inherited resources. The trustee can directly pay for certain expenses using trust assets instead of outright transferring those resources to people who might misuse them. Additionally, trusts are typically harder for people to challenge in probate court. Individuals who have children who always fight or a loved one with special needs may recognize how beneficial a trust could be for protecting their wishes or structuring the inheritance of someone vulnerable.

Learning more about different estate planning tools can be very useful for those hoping to maximize their legacy and minimize losses later in life and after they die. Seeking legal guidance is a good way to get started.