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Revocable Trusts and Chronic Illness

Revocable Trusts and Chronic Illness

By: Martin M. Shenkman, CPA, MBA, JD

April 4, 2011 RADIO SHOW

Revocable Trusts: Great for Planning Not Just Probate Avoidance

Money Matters Radio – Estate Planning Checklist

By: Martin M. Shenkman, Esq.

Introduction/Overview: Revocable trusts are commonly used to avoid probate, but are they also powerful tools to help those living with health issues? Absolutely – if properly done they can be the most flexible and protective planning step you can take.

Consider the following items?

What is the key benefit: If you reach a point because of aging, Alzheimer’s disease or any other health issue when it becomes difficult to manage your assets, you’ll have a mechanism in place, with protective safeguards, to do this for you. If done well, it may enable you to avoid a guardianship proceeding.

Who should be named trustee: You might be a co-trustee from the beginning. Consider not being the sole trustee so that if you become ill, or are hospitalized or face another emergency, you have a co-trustee to help out. Make sure whoever you name is trustworthy and has integrity. You don’t need to name someone with legal, investment or other special expertise. Someone trustworthy can hire outside experts to help.

What else should be done: Talk to the lawyer drafting the document and explain your current and likely future health challenges so that he or she can tailor the document to your particular situation. Here are a few examples:

  • If you have a disease like Crohn’s disease and might be hospitalized unexpectedly, perhaps you should only be removed as trustee of your own trust for a disability if you cannot function as trustee for more than a month. That will give you a chance to recuperate from perhaps most attacks and resume your role as co-trustee of your own assets.
  • Consider authorizing either trustee to make routine and ministerial actions like paying bills alone and without the approval of the other co-trustee. This way, if you’re sick for a short period, someone else can continue to take care of matters.
  • Consider mandating that an independent Social Worker interview you in your home once as quarter and issue a report to the co-trustees and successor trustee. That way if something problematic occurs there is an independent trained expert identifying the problem and advising not only the current trustee but a success. If the current trustee is not doing their job, a check and balance is created.

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