Month: July 2017

The difference between a Revocable trust and an Irrevocable trust.

People often ask us to explain the difference between a revocable and an irrevocable trust. That’s a tough one because there are so many kinds of trusts and even irrevocable trusts can, within the terms of the trust, allow certain things to be revoked or amended. But here’s our answer.

Most people who consider forming a trust like the concept of a “revocable” trust. The word “revocable” implies that you can amend, undo, change, alter, or revoke the trust. When someone hears that a trust is “irrevocable,” they often get concerned because that implies that things are rigid, fixed, inflexible, and control is lost.

The typical “avoid probate” trust is a revocable trust. There is no requirement that the typical “avoid probate” trust be irrevocable. Your home and other assets must simply be titled in the name of your trust when you die.

Other trusts that people establish, however, are irrevocable because the trust must be irrevocable to get the benefits that the person setting up the trust is attempting to get. For example, people with large estates will often transfer a portion of their estate each year to an irrevocable trust for the benefit of their future heirs. To exclude the assets from the taxable estate, the trust must be irrevocable. Assets that you own in your revocable trust will be included in your estate for federal estate tax purposes – but this typically applies to the wealthy.

For the middle class, many people transfer assets to an irrevocable trust to remove them from their name for nursing home purposes and to achieve Long Term Care Medicaid eligibility. Assets in your revocable trust, while avoiding probate, are Countable Resources and must be spent on your care if you enter a nursing home facility.

To make matters just a little more complicated, most people who form a revocable living trust provide, in their trust instrument, that their revocable trust becomes irrevocable upon their death. People do not want other third parties to be able to change the terms of their trust after they die.

So, whether you have a revocable trust or an irrevocable trust depends on your circumstances and what you are trying to accomplish.

The estate lawyers of Krause Donovan Estate Law Partners, LLC practice law in the areas of Probate, Wills, Estate Planning, and Trusts. We assist clients in and around Madison, Wisconsin with all matters related to estate planning, trusts, and probate matters. Our dedicated attorneys will even make house calls if you are unable to come to our office.

Contact our office by calling (608) 268-5751 to schedule a consultation or use our online contact form.

Protecting Assets When Parent Already in the Nursing Home

I met today with the children of a woman who is presently residing in a Madison nursing home due to her dementia diagnosis. The children had no idea how long term care and Medicaid financing for long term worked.

They told me that Mom owned a home, three annuities, some cash in the bank, and expensive jewelry and antiques. Their financial advisor referred them to my office. I asked them what they knew about long term care and Medicaid. They said they were starting to “hear things” but they wanted to get the truth.

I told them that if all of the assets stayed in their mother’s name, then their mother would be forced to spend her $475,000 of financial assets until she had less than $2,000 remaining. They told me that their mother was spending about $8,000 per month currently on her care. I also told them that – if Mom keeps everything in her name – then after Mom spends all of her finances, she will qualify for Medicaid, but then Medicaid will have the right to enforce its Medicaid Estate Recovery rights after Mom dies, forcing the house to sold after Mom dies to reimburse Medicaid for what they spent on Mom’s care after Mom spent all of her own money.

Since the timing of your legal planning to avoid losing assets to nursing home expenses is so critical, we are not going to be able to save as much for them as we would for those who are more pro-active and engage the right legal help when they are still healthy.

The children will be back in the office next week to sign a slew of legal documents to ensure that they will save and protect about $300,000 of Mom’s assets from losing it to the nursing home. While we weren’t able to save everything because this planning started while Mom was already in the nursing home, we are going to be able to save hundreds of thousands for this family – even if Mom resides in the nursing home for many, many years.

The estate lawyers of Krause Donovan Estate Law Partners, LLC practice law in the areas of Probate, Wills, Estate Planning, and Trusts. We assist clients in and around Madison, Wisconsin with all matters related to estate planning, trusts, and probate matters. Our dedicated attorneys will even make house calls if you are unable to come to our office.

Contact our office by calling (608) 268-5751 to schedule a consultation or use our online contact form.

Independence Day 2017

This July 4th, the U.S. will celebrate its 241st Independence Day! On July 2, 1776, the Continental Congress voted in favor of independence. Two days later on July 4, its delegates adopted the Declaration of Independence, drafted by Thomas Jefferson, and declared the 13 American colonies independent states and no longer a part of the British Empire. Check out the infographic for some fun facts to help mark the holiday!

How will you be celebrating this Fourth of July?

 

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