Talking with your parents about their estate plan can feel morbid or can strain your relationship with them if they misinterpret your motive as being rooted in greed, not concern. However, the real goal in such a discussion is transparency and to help ensure that your parents have taken the necessary steps to protect their legacy and wishes as their lives progress.
Many people think that their estate planning is done when they make a last will and don’t revisit it to have it reflect their changing life circumstances. That lack of review and reconsideration can mean that an estate plan doesn’t reflect their current assets, family situation or needs.
For older adults who might be on the cusp of incurring substantial medical expenses or even meeting Medicaid for long-term care, asset protection planning, likely involving the creation of a trust, could be a very important step that helps them and the people they love.
How trusts work in an asset protection capacity
A trust is a tool that people employ for a number of different reasons. A trust is a separate legal entity from an individual, and it has a trustee or possibly several trustees that oversee its administration, including the distribution of assets to beneficiaries and the management of assets to maximize their value.
Trusts can help provide ongoing financial resources for children or adults with special needs. They can protect an inheritance from guardians if parents of a minor child die. They can also prevent creditors, such as medical facilities, from claiming assets from someone’s estate. Additionally, placing assets in a trust can make it easier for someone to qualify for Medicaid, as those assets won’t count against what they can own while still qualifying.
For older adults, a trust can protect them and their family members
Trying to convince your parents to create a trust can be difficult. People may not want to complicate what they see as a simple and effective estate plan that only includes a last will.
Explaining the potential benefits of a trust is one way to convince your parents to view their estate plan and expand it. If they understand that their future medical care and your potential inheritance could be at risk if they don’t take action, that may be an adequate motive for them to consider your advice to create and fund a trust.