Many New Yorkers remain unfamiliar with the benefit and flexibility of using trusts to plan for the future and protect assets in the present. Trusts can prove useful for all residents, including most middle class families. In our work with estate planning, we often help set up basic living trusts which help avoid probate and streamline the inheritance process. On the elder law side, Medicaid Asset Protection Trusts are used to protect assets from the “spend down” requirement needed to qualify for Medicaid and secure necessary long-term care.
Beyond those two trusts, however, there are many other options that may prove useful depending on your specific situation. A LifeHealthPro article last week discussed a few “specialty” trusts. A review of the topic is a helpful way to get an idea of the true scope of trusts and the many different ways that they may be used to carry out very specific wishes.
For example, some of the trusts mentioned in the story include:
Incentive Trusts – One common concern regarding inheritances–particular large ones–is the effect that it may have on the one who receives it. Parents do not want children or grandchildren to lose their drive and ambition as a result of having a sizeable inheritance fall into their lap. To prevent that, an incentive trust can work by being dispensed to a beneficiary based on certain benchmarks. For example, the trust may only “match” an individual’s income, acting as a spur for them to improve their own annual salary. Alternatively, the trusts can be based on meeting certain life goals or other set points.
Travel Trusts – As the name implies, these trusts pass along assets that must be used for travel. For example, a family may have a rich heritage in another part of the country or the world, and a trust can be created specifically to ensure younger generations are able to visit that location at some point in their lives.
Heirloom Asset Trust – These trusts protect a specific asset from leaving the family. Whether it is a summer home, artwork, or other valuable and meaningful property, the trust can act as a safety net. Instead of simply giving the object to someone else and hoping it it not sold, this tool provides more certainty.
While many unique trusts are available, it is important to understand the potential ramifications of using each. An attorney can explain potential pitfalls in placing too many limits on how others can use trust funds down the road. There are no one-size-fits-all answers, but at the very least one must think critically through all scenarios before deciding on the best plan.