The U.S. population is aging at a rapid rate. Within the next decade, around 20 percent of the U.S. population will be over 65. This is one of the first times that older Americans made up such a large portion of the population.
As we get older, it’s more important than ever to start long-term care planning. Even though retirees need long-term care and estate planning in retirement, very few have this plan. Do you have a plan in place for your loved ones, or do your parents have one in place?
Why is this so important? A lack of planning can really impact your finances and put family caregivers in an uncomfortable situation.
Keep reading to learn more about long-term care as we take a look at living trusts.
The Complexities of Long Term Care
There is more to a long-term care plan than budgeting. You need to include information like the type of care you want, who should provide that care, permission for family members, and how to finance these costs.
Your basic estate planning starts with getting a will that deals with your property and also states the important decisions on the care of minor children (if needed). An estate plan also includes directives on advanced health care, so you can let your doctor and loved ones know what medical steps you are okay with and what you don’t want to happen in a life-threatening medical scenario.
If you have these things in place, you are off to a good start. But, let’s go a step further with the living trust.
What Is a Living Trust?
A living trust (also called a revocable living trust) is a legal document that permits the property owner to transfer their ownership of assets to a trust, which is a legal entity that contains real estate and other holdings. This document places all your assets like real estate, bank accounts, investments, personal property, and vehicles into your trust during your lifetime. You can then say where you want these items to go upon your death. It is called revocable because you can change or cancel anytime during your lifetime.
For example, a parent can take a house that they own and transfer the ownership into the trust. You can name yourself the trustee (and your spouse a co-trustee), and then you remain in complete control of these assets. Then the ownership of the home can transfer to the child when the parent dies or has a disability.
The living trust also names the trustee, which is the person that will administer the assets outlined in the trust. You can even take it a step further and name the beneficiary. This is the person that should receive the benefits when the grantor dies.
For example, the spouse is named as the grantor, and the child is named as the beneficiary. If you have everything spelled out, your beneficiaries will receive your assets without any court involvement.
Advantages of a Living Trust
So, why should you get a living trust? There are several reasons you should consider a living trust to benefit your loved ones.
One of the biggest reasons to have a living trust is to avoid probate, which is a court-supervised process that reviews the deceased individual’s estate and affairs. Probate does tie up loose ends, but the process can be time-consuming and costly for all involved parties.
This is why people turn to an estate planning attorney to draft a living trust to spare their heirs any court hassles.
A person’s personal and financial situations can change. This is why it’s pretty common for grantors to change the trust and change assets. You can even change the beneficiaries listed anytime during your lifetime.
Maintain Your Privacy
Because court records are public, probate can uncover unpaid balances, debts, and other details people may want to keep private. Anyone can look up these records and get this information. Because a living trust helps avoid probate, this information can remain private.
Addresses Minors Or Dependents
Grantors can also tailor the terms of the trust to make sure that loved ones get what they need. For example, if adult children have issues managing money or have an illness, the grantor can place conditions on the sale or use of assets within the trust. The grantor can also address dependent or minor children that have a disability by appointing a guardian to look after them.
Other Things to Consider
There are other legal decisions that you need to consider, and there are limitations on what a living trust can do. Before you determine your best course of action, you should consult an attorney specializing in estate planning. Here are things you need to address in your long-term planning.
Protecting Your Assets from Nursing Homes
A revocable trust does not protect your assets from offering nursing home costs. You’ll need to consider these potential costs as you age and need more care. You should work on your financial calculations to make sure you are set with your estate strategy if you need additional funding to cover this care, so most people look to long-term care insurance.
Avoiding Estate Taxes
You can really save on estate taxes. As long as you have these assets, they are considered part of your estate, which means the IRS collects the taxes.
Saving on Legal Costs
You will need to hire an estate attorney to help you gather and set up the living trust. This means there is an expense upfront, but it is a worthwhile investment from a long-term perspective.
Making Hard Decisions
You will still need to decide and discuss which beneficiaries will receive which assets and property. This topic can be extremely uncomfortable. You may even have to spend time together with your family to put together the paperwork and document your assets in detail.
Help for Estate Planning
A living trust may not be for everyone, but it can certainly help you if you have a lot of assets. It can be beneficial if you own property in multiple states or if you have extended family that can make more things complicated.
It’s not just about how much property or money you have either. This trust can give you the assurance that you can distribute your assets to your wishes. You also know that the process will be painless and smooth for your family.
Looking for more advice? Contact Rhodes Law Firm today. We are here to help make estate planning as easy as possible, so you don’t have to worry about putting strain on your family.