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George H. Gray

Why Do I Need To Appoint a Trustee As Part of My Estate Plan?

Trusts are a more often used Estate Planning strategy than conventional wisdom would predict

Why_I_need_a_TrusteeTrusts are more commonly used in the Estate Plan of a middle-class New Yorker than conventional wisdom would predict.  For instance, a trust for the benefit of minor children is always a good idea when planning for their lives after the death of both parents. Parents and grandparents of a child with special needs will find the many advantages of a supplemental needs trust worth exploring. Elderly couples may find an irrevocable income only trust a useful tool in their Medicaid Planning.

It is considered best practices to provide for a trust to manage and distribute the content of your Estate in the event both you and your spouse pass away while your children are minors.  Consider the alternative!  If your minor children inherit your Estate outright, the content of the Estate will be under the supervision of a Court and managed by a “Guardian of the Property” of the minor children.  This will place constraints on where the assets can be invested; and, it will require prior Court approval for each expenditure made.  The entire content of the inherited Estate will be distributed to your child when he or she attains 18 years of age.  If your Will provides for a trust for the benefit of your minor children, you, not a Court, will direct the investment of the trust principal; the distributions to your children and how long ultimate distribution will be delayed.  

If your child or grandchild is receiving “means-tested” government benefits, he or she will lose those benefits if they inherit directly from you.  A supplemental needs trust (a “SNT”) is one established by you, for the benefit of a child or grandchild with a disability, which will not affect his or her “means-tested” government benefits.  The contents of the SNT can be used to enhance and enrich the life of the child; and, the amount remaining at the child’s death can pass to any person or entity you select.  Your Estate Plan will name the SNT as beneficiary of the portion of your Estate you intend to benefit the child with a disability.  In this way, the SNT, not the child or grandchild, is the direct beneficiary of your Estate Plan.

An elderly parent, at least 5-years from admission into a nursing home, can transfer a significant portion of his or her assets to an irrevocable income only trust, sometimes called a “Medicaid Trust.”  The income, but not the principal, of the Medicaid Trust is paid to the parent during his or her lifetime; while, what remains passes to whomever the parent selects.  In this way, provided the Medicaid Trust is established at least 60-months before the parent applies for Medicaid, the principal of the trust is protected from the reach of the State.   

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