As a caregiver to a family member, your role is unique in several ways. In addition to having a personal connection (and a shared history) with the older adult in your care, other responsibilities like financial and estate planning may also fall to you—specifically because of your family relation. In fact, 90% of the more than 40 million caregivers of older adults in the United States are caring for a relative.
Whether you’re helping to manage caregiving expenses, planning for end-of-life care or discussing what happens to your loved one’s estate after death, the process can be overwhelming. In addition to using a financial advisor, understanding your options is critical.
While most Americans who save for retirement have investments via traditional retirement options (54% have savings in a 401(k), 33% use an IRA and 22% have a pension), only 33% have a true estate plan, and two main types exist: wills and trusts.
While most Americans who save for retirement have investments, only 33% have a true estate plan.
Wills vs. trusts: Know your options
Wills are a common option for estate planning among Americans for many reasons, including the ability to explain exactly how you want to distribute your assets and lessening the chance of needing a court to decide how funds are used, among other benefits.
Trusts are a legal document that stipulate how you transfer assets. They are beneficial for many reasons, but are most commonly used for their ability to offer significant federal estate tax and other protective benefits, including privacy. When your assets are assigned to beneficiaries through a will, the will becomes public record, allowing anyone to access and view the details of your estate. If they are part of a trust, those trust assets can be allocated without public view. If privacy is of concern to you or your family, a trust may be the better option, as it allows for direct transfers of your assets to your beneficiaries.
What is the purpose of a trust?
People choose a variety of trust types for different reasons, but one of the most common is to ensure their assets are handled and distributed according to their wishes, which goes into effect the moment the trust is formed until long after they’ve died. This gives grantors peace of mind their wishes will be followed exactly as they described, and that their loved ones will be cared for long into the future.
Another common reason for choosing a trust? It can help manage taxes on an estate, as well as protect your wealth while still qualifying for Medicaid by distributing your assets to loved ones and trust beneficiaries.
How to know if a trust is right for you or your loved ones
While a trust may not be the best option for everyone, knowing your options and the benefits of a trust is an important first step in the decision-making process. Trusts are beneficial to people in specific situations, such as:
- Homeowners or property owners (especially if that real estate or property is out of the state or country)
- Those who have $200,000 or more in assets
- Owners of a “taxable” estate
- Those who want to streamline the probate process for loved ones after they die
- Those with specific desires for how and when their assets are distributed
- Those seeking privacy of the details of their estate
Several types of trusts are available, which offer slightly different benefits and serve different purposes. It’s important to discuss with the older adult in your care their goals and wishes for their estate to select the best option for your family. Different types of trusts range from:
- Living trusts: Living trusts are created during your life and outline trustees of your estate after you die.
- Revocable living trusts: Revocable trusts are created during your lifetime and can be altered or revoked while you’re still alive.
- Irrevocable trusts: Un-editable once established, irrevocable trusts remove any legal rights you have to anything included in the trust. This type of trust is beneficial to those vulnerable to lawsuits.
- Joint trusts: Established by two people (like husband and wife), joint trusts can be altered while both are still living. When one person passes, the other becomes the successor trustee.
- Testamentary trusts: This type of trust is created within a will and can only be established after you die, requiring it to go through probate.
When is the time right to discuss creating a trust?
As caregiver to an aging adult and as a family member invested in protecting the family’s estates and assets, a trust is a helpful tool to offer when discussing long-term financial planning.
Trust & Will explains that while there is never a bad time to create a trust document, there are certain life triggers that might prompt a family to start the process. Changes in marital status, the birth of a child or grandchild, having minor children, recent acquisition of new assets, concerns over a loved one becoming incapacitated, or a shift in lifestyle—all are events that make people think about the future of their estates.
Can I create a trust online?
Companies like Trust & Will offer do-it-yourself online estate planning tools for your convenience, backed by estate planning experts and a robust library of helpful resources. The company’s mission is to make the process of setting up an estate plan as “simple and straightforward as possible.” And at a budget-friendly price, the company offers an online service that makes it palatable to provide you and your family the peace of mind you need (trust-based estate plans start at $599 for individuals and $699 for couples). In comparison, working with an estate planning attorney could cost thousands of dollars to set up a trust.
As a caregiver, your role can often blend from companion and family member to health care provider and more. Adding a financial decision-maker to that list is not an easy choice to make—or one to be taken lightly. It’s important to know when to ask for guidance from an experienced financial planner to help navigate major life transitions.
Reach out to your financial advisor today or estate planning attorney to discuss the details of establishing a trust for your family member. Or, to learn more about estate planning, get valuable resources or speak with an estate planning expert, visit trustandwill.com.