Your parents may have reached an age where they need help with their finances. You may be concerned that they will mismanage their assets or succumb to elder financial abuse that could deplete their savings.
These finances are critical at this stage in your parents’ life to make sure they are taken care of and get the care they need. Setting up a living trust for elderly parents is not only a wise decision but can make sure that they are cared for long into the future.
What Is A Living Trust?
A living trust is a legal documentation of how to handle your parents’ finances and assets. These living trusts for elderly parents are often set up to help them manage their money as they become older, or their health is deteriorating.
With a living trust, a grantor is used to create the trust and put all the assets in place under the trust. A person in your family will be appointed to manage the trust and beneficiaries will be named to inherit the assets that have been named in the trust.
There are several types of trusts to consider for your parents including:
- Testamentary Trusts
- Irrevocable Living Trusts
- Revocable Living Trusts
Will Vs Trust
First, let’s understand the difference between a will and a trust. A will is the legal documentation that takes effect after a person has died. A will outlines where the assets will go as well as any monies that are available. Wills have to go before probate court and taxes have to be paid on the inheritance.
With a trust, the person it is protecting is still alive and dictates how their finances should be handled as they most often aren’t able to make these decisions for themselves any longer. Trust monies are not taxable and do not require the direction of a court to disperse them.
Trusts can also be set up to direct wishes before death, at death, and after death. A trustee is appointed, and they make sure that the finances are handled according to the documentation laid out in the trust. A trust is active the moment it is funded while a will doesn’t go into effect until a person has passed. Trusts also remain private, while a will becomes public record as dictated by the court they go before.
What is A Revocable Trust?
When you are establishing a living trust for elderly parents, it is important to consider what type would work best for their situation and needs. A revocable trust allows the grantor to revise or revoke the terms of the trust at any time without any consent from its beneficiaries.
The grantor is the sole controller of the trust allowing for a successor, if necessary. Having a revocable trust offers an added layer of protection for your parents as it makes it difficult to mismanage the monies of your parent by a family member that is not the trustee. It can also be revoked in court if the grantor objects or your parent is unable to control their assets at any time.
What Is An Irrevocable Trust?
With an irrevocable trust, the beneficiaries have a say in if it is revoked or revised in any way. They must provide their permission to make these changes. The grantor of this trust loses their right to the assets when transferred.
An irrevocable trust is typically used when a parent is applying for Medicaid, so they don’t have to dispose of all their assets to become eligible for the health care coverage or nursing home care. This allows your parents to hold on to their assets to pay bills and still qualify for Medicaid as well as making sure a spouse doesn’t lose their home upon the death of a significant other.
Although an irrevocable trust may be used in some states, it is typically not used in Florida for people applying for Medicaid.Moreover, an irrevocable trust only protects assets from Medicaid after the assets have been in that trust for at least five years.
What Is A Testamentary Trust?
You may also want to consider a testamentary trust as this type of trust is used to protect a spouse upon death. Assets are transferred into a testamentary trust upon the death of a spouse and allow a trustee to make all financial decisions regarding their assets. Your parent will have no control over their finances and will be protected from any mismanagement that can come from grieve or fraud attacks.
Setting your parents up with a living trust can ensure that their finances are protected and not susceptible to fraud or any mismanagement. This will give your parents freedom in later in life and allow a living trust for elderly parents to securely care for your parents as they age or become ill.
Besides a Living Trust and a Will it is also important to learn about Power of Attorney because the last one can help you to make a decision for your elderly parent when they cant do it anymore.