What Is It?

A Discretionary Trust is another type of trust that is commonly used by a grantor seeking to distribute assets to a class of people or their family. Unlike a mandatory trust which requires distributions of income and principal be made according to a set schedule that is executed in the trust document, discretionary trusts allow the trustee to make determinations about when and how much beneficiaries are to receive in capital and income from the trust. Beneficiaries of discretionary trusts do not have entitlement to a specific interest in the trust, they have a right to be considered for the appointment of property or income from the trust

When and Why To Use a Discretionary Trust

A directed trust is a type of investment trust that appoints a particular trustee, usually a bank or firm, to administer specific aspects of the trust. Trustees who are responsible for directed trusts generally have a number of other professionals who assist in their administration of the trust by providing investment recommendations and distribution recommendations to the beneficiaries. By delegating these duties, the trustee as well as the beneficiaries are benefitted because the beneficiaries now are receiving expert advice in areas such as investing, while trustees can focus on maintaining the purpose of the trust and can in some cases limit their liability, depending on the state law.


Delaware directed trusts are a specific type of directed trust that is administered in the state of Delaware. Trustees will recommend that a trust be held and administered in Delaware depending on the nature of the assets that a party holds and what they seek to do with those assets. Many advisors or trustees will recommend a Delaware directed trust if the grantor, or maker of the trust, had assets that are concentrated, illiquid or difficult to manage. Illiquid assets are those assets which cannot be sold without a substantial drop in value or assets and are unique in that they are difficult to sell because there is not an immediate demand or interest by investors to purchase the asset. Other examples of concentrated or difficult assets that may be suited for Delaware directed trusts include stocks or other securities which have historical value to the family or that the beneficiaries think will perform well long term. Here, the trustee can continue to be responsible for managing the diversified assets, while an investment advisor can work with the beneficiaries in handling the concentrated asset.
Other benefits of this type of trust involves protecting the grantor’s interest by appointing a trust  protector who will act on the behalf of the grantor to ensure his or her goals come to fruition, which includes the ability to remove a trustee they feel is not following the grantor’s wishes. A distribution advisor can also be appointed to assess what is important in their specific situation when making future distributions. Additionally, in the majority of situations, Delaware’s tax laws apply to trusts as well. Delaware courts also do not require court filings in an effort to maintain the privacy of individuals and grantors can restrict a beneficiary’s access to some information, depending on the situation and trust.

Rising Medical Bills

Experiencing a life threatening accident or injury is one of the scariest and most confusing times in a person’s life, but what further complicates these emotional times are the staggering medical bills received after, without warning. In an effort to combat receiving these unexpectedly high bills and further open communication between hospital and patient, The NOTICE, or Notice of Observation of Treatment and Implication for Care Eligibility, Act will change the way patients are notified about potential costs incurred.

Starting in August 2016, this Act requires that hospitals throughout the country notify a patient about their status as either ‘inpatient’ or ‘observation’ status. When classified as an inpatient, Medicare will cover all, or a substantial amount, of  the costs of medical bills incurred by the patient if they are covered under it. However, if the patient is classified as being under observation, Medicare may no longer be responsible for the bills incurred and the out of pocket costs fall on the patient, which has commonly been unbeknownst to the patient until release or weeks later when the bill is received. In order for an elder to receive care at a nursing home following a hospital visit, they must have spent three days in a hospital under inpatient status.

Estate Taxes

When the proceeds from an estate are being distributed after death, many beneficiaries are surprised to find that they receive a substantial amount less than anticipated due to the federal estate tax or the state tax that must be paid on these proceeds. Specifically, life insurance proceeds tend to account for a significant portion of an estate’s worth and are thus included when calculating estate taxes.

When combining what will be taxed from an estate, the executor of the estate must include any of these when reporting on an estate’s proceeds: funds in bank accounts, value of investment accounts, any property including cars and personal assets, life insurance proceeds, retirement accounts or funds, and the value of any business owned.

Depending on the purpose of a trust, a trust may be able to further sustain its’ life and generate additional income by investing the funds originally set aside by the grantor in a variety of investment tools. In order to generate additional income, a professional investor will seek to have a diverse portfolio established in order to mitigate any potentially large losses and keep your funds safe.

While the idea of hitting it big with one major investment is the dream of many, the reality is highly unlikely, thus, investing money in a wider range of areas is beneficial. While the investment team and trustee will be able to best assess the proper investments for your trust funds, each situation will differ and will be influenced by the risk the trust is willing to take as well as the timeline for distribution of funds needed.

Types of Investments

Real Estate Investment Trusts are an investment tool that allows an interested party the ability to invest in commercial real estate by buying a specific portion or interest of property. A Real Estate Investment Trust, or REIT, is a company that owns and also finances income-producing commercial real estate, generally for the purpose of investment and resale.

Many people who seek to invest their income and build a diverse portfolio look to add real estate due to its income producing potential. This investment tool allows an investor to own a share in several properties without having to front the major costs of purchasing an office building, apartment complex, industrial warehouse, or shopping plaza.

Why Add a REIT to your Portfolio?

Providing reasonable care for the rising number of senior citizens continues to be issue of concern for our health care system. What constitutes providing adequate care differs depending on the situation; many senior citizens have expressed concern regarding their ability to stay in their homes and receive care versus moving to a nursing home in order to receive adequate health care under Medicare. In response to this issue, Medicare enacted a program that will pay to keep elderly and disabled citizens out of nursing homes by providing in home care specialist teams to treat the patient.

Program for All Inclusive Care

PACE, or the Program for All Inclusive Care, is a program for elderly adults who seek comprehensive medical and social services, wish to stay in their community, and in most situations are eligible for both Medicaid and Medicare. To be eligible, the individual must be 55 years of age or older, live in the area of a PACE organization, be eligible for nursing home care, and be able to live safely within the community. PACE is program administered by Medicare, but must be elected at the state level to provide the optional benefit to Medicaid beneficiaries. Once elected, the program will be the only source of Medicare and Medicaid benefits for the beneficiary, but is much more comprehensive.

An Overview

A trust is established by an individual, referred to as a settlor, who seeks to have their property held for the benefit of another party. When it comes to charitable trusts, the settlor intends to have their property or assets transferred for the benefit of one or more charities.

Charitable ‘split interest’ trusts have a number of benefits, not only because they allow the settlor to give to both charitable and noncharitable beneficiaries, but they also reduce the amount paid in estate taxes, they eliminate capital gains, provide an income tax deduction and also provide for and benefit charitable organizations versus paying the IRS. There are two different kinds of charitable ’split interest’ trusts available, which differ depending on the property or assets you seek to donate to the charity, how you want the property to be distributed, as well as any wealth preservation measures you seek to have followed.

Pooled Trusts Eligibility

Pooled Trusts are a type of trust applicable to those individuals who are seeking public assistance benefits, such as Medicaid, to become eligible financially by setting aside funds in a trust for additional needs. The trust allows its beneficiaries to preserve a specified amount of money in a trust to pay for supplemental care not covered by public assistance programs. For the elderly, many need public benefits assistance as they continue to age but do not qualify based on higher income. In these situations, a pooled income trust will benefit an elderly person by allowing them to continue their lifestyle, which is usually seeking to stay in the home, while also obtaining homecare services and paying for what their budget requires.

New York Medicaid Rules

There are many factors that go into maintaining a budget in a family while also trying to save for the future. For Americans, the cost of maintaining a household has gotten continuously more expensive; the average cost of raising a child born in 2013 now costs roughly $245,000 for a middle income family in the United States, with housing for the child accounting for about 30% of those costs. This is compared to a study done in 1960 by the United States Department of Agriculture that stated middle income families could expect the average cost of raising a child to be a little more than $25,000 until age 18. Interestingly in both studies, housing accounted for the largest expense for the families surveyed. The children once focused on in these 1960s studies have now become the focus of our article, and one thing remains the same, housing is still the biggest expense they must account for.

As the aging population refocuses their priorities for housing, they must consider factors such as accessibility to stores, services, transportation, medical care if they experience chronic conditions, as well as access to social settings and connections. The worry of many aging people is that they will be forced to leave their home and instead reside in an assisted living or nursing home in order to retain government assistance with healthcare. There will also need to be a refocus on the ability to provide for a more diverse population of elderly people; with the thousands of individuals turning 65 years old daily over the next two decades will come a much more diverse population that has had drastically different housing situations.

Possible Solutions

Contact Information