By Elizabeth A. Caruso, Esq.
I am continuing my focus from last month on reasons why you may want to have a trust. This month’s focus will be on disability planning, not from an individual perspective, but for a loved one who may have a disability. We will tackle why a trust helps with the distribution of an inheritance to minors next month.
When establishing your estate plan, you need to be cognizant of the myriad situations your loved ones may find themselves in, and what impact your inheritance may have on them. This is a time to think about what it is that you are actually trying to give to your loved one, and do they have the skill set to manage it appropriately. Do you want to just give your loved one their inheritance outright, not caring about what they do with it once it is in their hands, or do you want their inheritance to be managed on their behalf?
One reason you may want to have an inheritance managed on behalf of a loved one is simply that they lack the financial sophistication or maturity that you expect to be able to manage to funds you are giving them. Another reason would be that your loved one has an addiction or substance abuse problem and giving them access to a large sum of money all at once would be very dangerous for them.
In these situations, setting up a trustee as a gatekeeper to your loved one’s inheritance can help to increase the chances that the money lasts longer and is used as you had intended it to be used. In these cases, the trustee has the discretion as to how, when, and how much money can be distributed to your loved one. If the trustee suspects that your loved may try to use the funds in a way that you did not intend, then the trustee can offer to pay for things directly on behalf of the loved one or deny a distribution all together.
A very similar situation where you would want a trustee to be in charge of the inheritance for a loved one would be where the loved one has a permanent disability. The receipt of an inheritance from you could jeopardize any government benefits that they receive like housing, vocational assistance, home care, etc. There are ways that trusts can be drafted so that an inheritance can be held on behalf on the disabled loved one, they can enjoy the funds at the discretion of the trustee, and not jeopardize the benefits they receive.
An elder law attorney can help you to create a trust that is set up with the necessary language to protect your loved one’s inheritance should you feel that protection is necessary. If you already have a revocable trust and you don’t know if it contains these aspects, an elder law attorney can review it and advise you.
About the Author: Elizabeth A. Caruso, Esq. is an attorney at Legacy Legal Planning, LLC, in Norwell. She has been practicing estate planning, probate, and elder law on the South Shore for more than a decade. If this article has sparked questions for you, please feel free to reach out via phone 781-971-5900 or email elizabeth@legacylegalplanning.com to schedule a time to discuss your unique situation.
