My parents, both in their 70s, are in the process of setting up a revocable trust; mainly for the sake of sparing my sister and I from going through probate after they pass. We are meeting with the estate planning lawyer in two weeks to discuss the finer details, including the question of who the trustee(s) of the trust will be.
Thinking about the possibilty of me being a trustee, my basic understanding is that managing a revocable trust while my parents are still alive would involve considerably less administrative work than looking after an irrevocable trust. This is one of the things we will be discussing with the lawyer.
But if anyone here has any anecdotal informaiton or advice about what this work looks like, I'd be grateful for it.
When she set it up, the lawyer came to our house and sat down with mom AND me, since I was the successor trustee and explained the ins and outs of it.
Now, my mother did not own any real estate at this point, so the only "physical" property was her car, and in NY you cannot register a car to a trust. However, she donated that before she passed away, so once she was gone it wasn't an issue.
In addition to the trust, my mother had a "pour-over" will, which covered any items not listed in the trust (such as jewelry, household items, etc.). From my understanding from the lawyer, this is standard when setting up a trust.
There was a lot of "forward" work my mother had to do; each financial institution had to be notified, be allowed to review the legal wording of the trust, etc. Then her accounts were closed, and new accounts were opened titled "The E.E.A. Trust". Mom was the trustee; she signed all of her paperwork as she always did. She had control over what went into and out of the trust, just as she always did with her other accounts.
Her 401K was NOT registered in the trust, since they are not subject to probate upon death; they can be directly distributed.
I have to say, I was so incredibly grateful when she passed, because I was her executrix, and I didn't have to go through the probate process. The lawyer had made it very clear to me what to do when she passed away; the first thing I did was go to her accountant who filed for a new Tax ID number, because once she passed away, the trust went from revocable to irrevocable. (The trust was under her SS number). Then the only things I needed to supply her financial institutions with were the new Tax ID number, a copy of the "title" page of the trust and a copy of her death certificate. The only financial institution that gave me any sort of issues was Chase bank, and that was just to have their lawyers (once again) review the trust documentation they had on file to make sure it matched the cover page. That took a few days until they approved the documents.
My mom died in the beginning of October, and I was able to have her entire estate distributed before the year was over, so I only had to do one tax return for the estate. It helped, as I said, that mom didn't have any real property - such as a house - that had to be sold. Settling her estate under the trust really wasn't an onerous job, it was a few hours of phone calls and a lot of scanning and emailing documentation (mom died smack in the middle of the pandemic).
The other great thing about a trust is, while a will becomes a matter of public record, a trust does not. As such, no one, outside of the successor trustee(s), has any real idea of what's in the estate; if you have greedy distant relatives you're concerned about coming out of the woodwork looking for their "share", there's no public records they can cite. Even my sisters didn't know what, exactly, was in the estate. The lawyer made sure my mom was aware that she should pick someone she trusted as her successor trustee who would distribute her estate according to her wishes,
Imo Estate / elder law attorneys tend to be more about wealth transfer outside of probate and lowering/eliminating Estate taxes, not so much about knowing nuances of their States Medicaid program. But knowing how LTC Medicaid runs is super important.
Your folks, imo, unless they have serious amount of not needed for daily living saving$ + investment$, in the 800K- 1M range (not including home), if they live long enough imo they run a good chance of finding 1 if not both become “at need medically for a facility” and the folks will not have the $ to private pay for their stay. So 1 or both of them end up filing for LTC Medicaid. So understanding how this specific Medicaid program runs for how it is administered precisely in your parents State becomes beyond very important for elder planning on their assets.
Costs of care horrendous in the US. NH/SNF can run 8K - 18K mo p.p. Avg length of stay in NH/SNF is 2.5 years = 390K avg cost p.p. Elders can & do outlive their $ and end up filing for LTC Medicaid. Planning for that highly probable eventuality is important. Not just doing things that avoid probate. I’d try to find an atty who has experience in the Medicaid system as well as Estate Planning.
For example, whether a Trust is revocable or irrevocable matters for how their States Medicaid views the items in the Trust (like their home) to be countable asset & when for LTC Medicaid eligibility. So ask the atty as to this and get a clear answer that is backed up by the atty providing how their States Medicaid’s administrative code looks at Trusts.
Another item that could be impt for y’all is how their States Medicaid does the assets & income cleaving required for NH spouse / nonNH spouse (aka “community spouse”) situations. If becomes situation for your folks, does this law firm deal with doing this? There should be a worksheet that explains how division (spousal resource allowance /assessment) is usually structured, as super common to have to be done. Does their State allow community spouse SPIA? & would that be an option? & if so, does law firm bridge with the underwriter? If the folks income is over the max allowed by LTC Medicaid (rn it’s $2,982 mo income max), does this firm deal with Miller filings? If Miller isn’t allowed in their State, what else might be done? Ask the law firms, what items (eg life insurance, annuities) does their State require a beneficiary change to be made b 4 the applicant can be LTC eligible?
If the folks have 800K-1M+ assets, own an OK for aging in place home outright, each get higher end FRA SS of 4K or age 70 filing SS of 5K per mo., forget about the above. They are good for being able to private pay $$$$ for care. So no LTC Medicaid concerns y’all will ever have to fret over. But if not, please pls try to find a law firm that has experience with LTC Medicaid and can come up with Estate planning options taking that into account. Personally I’d start to look at law firms that are CELA level.
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If house into a Trust is being considered so that you can inherit, pls realize IF they file for LTC Medicaid THEN due to LTC Medicaid Share of Cost requirement = almost all mo income (SS$) is NH copay. All they keep is a sm allowance ($50-75 avg a mo). Unless Trust has its own investments making $, all house costs on you to pay. Could be years b 4 they pass. So give some thought as to if that home is affordable by you 100% for an indeterminate period of time.