Can an estate plan also provide parental support?

On behalf of Scaringi Law posted in Estate Planning on Monday, September 19, 2016.

Modern family arrangements and increased life expectancies have raised new issues in estate planning. For example, an individual may want to plan for the possibility of supporting one or more parents, yet not defeat that parent's eligibility for public benefits. A living revocable trust can accomplish this goal.

As we’ve discussed in previous posts, the creator of a living revocable trust, called the settlor, is also the trustee and beneficiary during his or her lifetime. After the settlor’s passing, however, the successor trustee assumes control and distributes the assets to the successor beneficiaries pursuant to the instructions in the trust documents.

A parent support statement designates a percentage of the residual trust estate for the benefit of the named parent of the settlor. The trust document generally specifies the conditions under which the trustee will make payments to the parent. As with other types of support trusts, the beneficiary does not have a right to demand distribution of the trust principal. That lack of control means that the existence of the trust should not defeat the parent’s eligibility for need-based public assistance programs, such as Medicaid.

A parent support statement must also provide for how the residue of the trust estate will be distributed, which is generally free of trust and in equal shares. Should one of those beneficiaries not survive the settlor, his or her share in the residual trust estate generally lapses. A law firm that focuses on estate planning can help an individual carefully think through all of the different options for this and other types of beneficiary designations.

Source: FindLaw, “Living Trust Information,” copyright 2016, Thomson Reuters


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