Our parents have spent decades caring for us and helping us to build our future security. Typically at some point, it is time for us to start helping our parents by making sure that they are cared for. We can provide transportation to doctor’s appointments, assist in making sure bills are paid, and help do the daily chores in California. All of these actions will help our parents, but there are also several types of trusts which can also help protect your parents and their future financial security.
One type of trust is called a special needs trust. If your parent is the recipient of Medi-Cal or SSI benefits, then he or she cannot have more than a certain amount of assets or income in order to continue to qualify. If you were to give a large gift to your parents to make sure he or she can meet expenses or even purchase extras luxuries, this would likely make them ineligible to continue to receive benefits. A special needs trust would allow you to provide them with funds while not making them ineligible for vital benefits.
Another way to protect your parents is called an A/B/C trust or sometimes a Qualified Terminable Interest Property trust (or “Q-Tip” trust). These types of trusts are the most appropriate for estates that have enough assets to be subject to estate taxes and where your parents are still married. With an A/B/C trust, upon the death of one the spouses, the estate is divided. Half of the assets are placed in a survivor’s trust for the surviving spouse. The decedent’s share of the estate is then divided twice, into two separate trusts, one of which is the amount of assets up to the amount exempt from the estate tax, and the remainder in a third trust. The assets in the survivor’s trust and the trust containing the remainder will be assessed together for estate taxes, and will only have to pay estate taxes if those two together exceed the estate tax exemption amount, assuming portability. The second trust will not be subject to estate taxes. This type of trust protects your parents by reducing or hopefully eliminating the estate taxes that need to be paid.
A spendthrift trust could be another way to help protect your parents. If your parents are poor at managing money, but you want to make sure that they still can continue to meet their living expenses, placing assets into a spendthrift trust can help. With a spendthrift trust, your parents will only be allowed money from the trust for very specific reasons, such as living expenses. The assets in the trust will be immune from seizure from most creditors.
We have many solutions for you to help protect the security for your parents in the future. Call us today to talk about your options.
