Setting up a trust in California can provide crucial financial security for your elderly parents and peace of mind, so you both can make the most of their retirement. They may be ready for retirement, but their financial and personal obligations are most certainly not.
Loss of Asset Access
Similarly to the above disadvantage, putting assets in a trust means you don't have immediate access to them. Even if you have a very open, revocable trust, taking assets from the trust to your personal bank account or elsewhere requires filing paperwork and extra time.
The six strategies for protecting elderly parents' assets are start early, spot warning signs, gather documents, request access to their accounts, get a view of their finances, and take care of legal documents.
There is no Ideal Time to Consider a Living Trust
Unfortunately, there is no real answer to the “right time” to create a living trust because it is not solely based on your age. Instead, wealthier people with expensive assets, regardless of age, should consider one of these documents.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
The answer will always depend on your own personal situation. Almost everyone should have a will, but if your net worth is greater than $100,000, you have minor children, and you want to spare your heirs the hassle of probate and/or keep estate details private, consider adding a trust a mix.
No one “takes” assets from the patient; the nursing home simply requires payment for its services if the patient intends to reside in the nursing home.
Irrevocable Living Trusts
Seniors over 65 who are eligible for Medicaid often choose to transfer assets into an irrevocable living trust to avoid having to dispose of assets in order to remain eligible for Medicaid coverage or long-term care benefits.
A: Property that cannot be held in a trust includes Social Security benefits, health savings and medical savings accounts, and cash. Other types of property that should not go into a trust are individual retirement accounts or 401(k)s, life insurance policies, certain types of bank accounts, and motor vehicles.
Orman was quick to defend living revocable trusts in her response to the caller. “There is no downside of having a living revocable trust. There are many, many upsides to it,” she said. “You say you have a power of attorney that allows your beneficiaries, if you become incapacitated, to buy or sell real estate.
Once your home is in the trust, it's no longer considered part of your personal assets, thereby protecting it from being used to pay for nursing home care. However, this must be done in compliance with Medicaid's look-back period, typically 5 years before applying for Medicaid benefits.
No Asset Protection Benefits
Creditors can still make claims against the trust's assets during your lifetime, potentially exposing your home to legal actions. If protecting assets from creditors is a primary concern, the limitations of a revocable living trust may be a disadvantage.
The senior can serve as the trustee and change or revoke the trust at their discretion. People create a living trust in California to help the senior maintain control of assets by serving as the trustee and beneficiary, and they can appoint a successor trustee or someone else to manage their assets.
Parents and other family members who want to pass on assets during their lifetimes may be tempted to gift the assets. Although setting up an irrevocable trust lacks the simplicity of giving a gift, it may be a better way to preserve assets for the future.
Aging adults without money to support them through the rest of their lives can stay in a nursing home for up to 100 days—and Medicaid will cover the cost for this brief period. Seniors who reside in an assisted living facility and run out of funds will be evicted.
Filial responsibility laws, also known as filial support laws, are legal statutes that require adult children to financially support their parents if they are unable to do so themselves. In California, these laws are outlined in Family Code Section 4400.
Nursing homes will continue to house those who have run out of money if they have already begun the application process for Medicaid. This means that even if Medicaid had not yet been approved, the resident still has a right to continue living in the nursing home.
Can Medicare take your home to cover nursing home expenses? Medicare can't take your home and doesn't cover nursing home room and board. However, a Medicaid lien can be placed on your home, and they can sell it once you pass to recover the funds.
If you have existing unpaid medical bills, and go into a nursing home and receive Medicaid, the program may allow you to use some or all of your current monthly income to pay the old bills, rather than just to be paid over to the nursing home, providing you still owe these old medical bills and you meet a few other ...
There are also some potential drawbacks to setting up a trust in California that you should be aware of. These include: When you set up a trust, you will have to pay the cost of preparation, which can be higher than the cost of preparing a will. Also, a trust doesn't provide special asset or estate tax protection.
Many advisors and attorneys recommend a $100K minimum net worth for a living trust.
A will may be the least expensive and most efficient choice for small estates with easily transferred assets and simple bequests. A trust without a will can present problems concerning assets outside the trust that become subject to intestacy laws. Larger and more complex estates may benefit by using both arrangements.