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Should I Set Up a Trust?

by Michele Malloy

Often clients ask if they should “shelter” their assets in a trust. The true answer is that it depends on your own individual and family circumstances. Each individual, family and estate is quite different. Here are just a few of the things to consider.

  1. A trust provides control over how the assets are invested and spent. BUT that is true as long as you are Trustee. If you become disabled or die, then only the trust document and the new Trustee decide what happens to those assets.
  2. A trust will get money out of my estate, so I can avoid estate taxes. BUT there is still a very high estate tax exemption level ($5.25 million per person) and there are usually expenses involved in maintaining a trust.
  3. If you move enough assets into a trust, you may qualify for Medicaid. BUT the federal government has a “claw-back” provision: They can claw back any assets moved within the five years prior to the need for Medicaid. In other words, they can un-do the trust and repay the government if any Medicaid was already received, or disallow you from receiving Medicaid in the future.
  4. Trusts provide protection, such as legal protection if your child is in the health professions and may get sued, or financial protection from subsequent step-parents. BUT the Trustee you choose may not know how to best invest your hard-earned assets or may even manage to divert some of the trust assets to himself or herself. When that happens, the Trustee can, of course, be sued, but often the money is long gone and cannot be recovered.
  5. Trusts allow you to include your values as a requirement for distribution of the money, such as only for college education, or a professional degree. BUT you may misjudge your child or grandchild and then there is no recourse after your death: your budding concert musician would not be able to use the money for music lessons.

Contact Michele Malloy at 281-367-8007 to help you decide if your situation would benefit, or be harmed, by having your assets in a trust.


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