Estate Planning

What Is The Client Trying to Accomplish?

Get legal advice before you make a major decision (especially decisions regarding gifting your assets to protect the assets from nursing home expenses).   

Client # 1:  Client desires to avoid probate at his/her death (so that the court isn’t involved) and pass the assets at death to his/her beneficiaries

          Possible ways to accomplish the client’s goal:

          (1)  use payable on death accounts (POD accounts), transfer on death accounts (TOD), or Totten trusts

          (2)  use beneficiary forms to transfer specific assets at death (life insurance proceeds, IRAs, 401k plans, 403b plans, annuities)

          (3)  set up a revocable trust (which can “own” real estate and other types of assets and pass them to the trust beneficiaries at your death)

          (4)  set up a land trust (which can only “own” real estate)

          (5)  set up an irrevocable trust (this wouldn’t be done solely to

avoid probate, but that is one benefit of such a trust)

          (6)  have joint owners (on real estate, financial accounts, etc.) –

but this should be done only after very careful thought (considering the various advantages and disadvantages)

 

Client # 2:  Client desires to avoid losing much or all his/her assets to nursing home expenses (if the client enters a nursing home and has a lengthy stay)

          Possible ways to accomplish the client’s goal (but a revocable trust

isn’t one of the options to protect the client’s assets from nursing home costs):

          (1)  gift assets to loved ones a sufficient period of time ahead of going into a nursing home (5 years ahead of time)

          (2)  gift/transfer real estate to loved ones (with the client keeping a “life estate interest”, this means that the client has the right to reside in the home rent-free during his/her lifetime and the client would be entitled to receive any rent if the property were rented out during the client’s lifetime)

          (3)  have joint owners (in Illinois, this can help protect real estate, but not other types of assets – not financial accounts) added to real estate deeds

if done a sufficient period of time ahead of going into a nursing home (this would protect part of the real estate)

          (4)  set up an irrevocable trust (where the client gets all the income from the trust, but the trust principal is protected because the client can’t get any of the trust principal) – real estate could be put into this type of trust

          (5)  purchase long-term care insurance to pay for nursing home care

 

          **  Note:  Gifting should be done only with proper legal advice.