The Benefits of Using a Trust for Future Estate & Long Term Care Planning

HNWElder Law, Estate Planning

Passing assets to family members is something elders often do in order to access public benefits and keep their assets away from creditors. Sometimes, attorneys may recommend to their clients that they gift the assets to their children. This advice is often given when a family member is aging and likely to pass away soon. This is referred to as “crisis planning”. Crisis planning can result in unintended and unfavorable outcomes for both you and your beneficiaries. It is therefore important to plan for the future when dealing with your estate and your long-term care.

Many individuals and families today have elected to plan ahead, rather than engage in crisis planning once a family member enters a nursing home. A proper estate and long-term care plan can help secure payment for a nursing home or treatment for an illness if necessary while providing the best possible avenue of transferring your estate to your children or other beneficiaries. This shift from crisis planning to future planning has occurred for two main reasons:

1) With the passage of many new laws, most notably the Deficit Reduction Act of 2005, New Jersey has forced people to plan ahead due to more complex and intense regulation. Without planning for the future, people may be leaving their spouse and families at risk for financial insecurity.

2) With people living longer and longer, more people witness a loved one’s admission to a nursing home. A first hand experience with a loved one entering a nursing home often sparks future planning from their family members. Once you see a spouse, parent, or grandparent enter a health care facility and the cost that ensues, pre-planning immediately makes sense.

Pre-planning involves sophisticated legal advice. Creating a proper trust involves many specifics that an experienced trust and estate planning attorney can assist you with. Establishing a trust is more beneficial than simply gifting the assets for many reasons, but mainly because it avoids changes resulting from the four D’s – debt, divorce, death, and disability. When you gift an asset outright, the person receiving the gift risks creditors collecting from it. Even if the person is financially stable at the time he/she receives the gift, unforeseen events may occur which could put the asset at the mercy of creditors, such as a car accident. Similarly, the gift receiver may get divorced, which risks equitable distribution of the asset. Gifting to a beneficiary is also risky due to the risk of death of the beneficiary. In the unlikely event that the beneficiary dies, the assets will automatically pass through the beneficiary’s estate, sometimes an unwanted outcome. The final risk of the four D’s is disability. If a beneficiary develops a disability, the government will look at the assets given to them as included in their overall financial picture. This may disqualify them from Medicare, Medicaid or other public benefits. The best way to avoid all the risks associated with the four D’s is to plan for the future by placing your assets in a trust.

Risks beyond the four D’s are also present, including the possibility of the beneficiary having a fight with the trust creator or simply a change or heart and deciding not to use the assets for the creator’s benefit. Another risk is always the beneficiary spending all of the gifted money, leaving none to pay for the creator’s long-term health care if they do not qualify for Medicaid.

Planning for your future is extremely important, especially today with stricter New Jersey laws. In order to avoid “crisis planning” and the risks associated with an outright gift, one should plan for their future by placing their assets in a trust. The use of a well-constructed trust is key to estate and long-term care planning.

Please contact Fredrick P. Niemann, Esq., an experienced NJ Trust attorney, today to speak with him about setting up a trust and estate planning for your future. He can be reached at 888-800-7442 or by email at He looks forward to hearing from you.

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