When I think about Grandma’s revocable trust, I think about her independence. Wow, she is unbelievably strong and mentally sharp. Like you, I love my grandmother.
Unfortunately, I know there will be a day, when she will need help from her trustees. On that day, her trustees will be asked to determine whether Grandma should fund a different kind of trust, to avoid the agony of handing her assets over to the State.
Here are two possible alternatives:
- Supplemental Needs Trust
- Special Needs Trust
If you have the time, lets take a quick look at these types of documents.
Supplemental Needs Trust for Grandma
As an alternative to Grandma’s revocable trust, consider a supplemental needs trust. A supplement needs trust helps grandma pay for needs not provided by a government-funded program. These types of trusts are for people of any age, provided they are not 65 years old or older, have a disability and are living in a long-term care facility.
In other words, if Grandma wants to utilize a supplemental needs trust, she needs to make it happen before she enters a nursing home. Between you and me, I wish this wasn’t the case. But, Minnesota law 256B.056 tells us differently. Otherwise, families risk a State audit or declaration document and exposing assets to creditors (like the nursing home).
Even more cool, is the fact these types of trusts allow for beneficiaries, like children and grandchildren. Provided the beneficiary themselves doesn’t establish the trust (or act as the trustee), this type of estate planning tool can provide a lot of relief.
Special Needs Trusts for Grandma
Another alternative to Grandma’s revocable trust is a special needs trust. Unfortunately, these types of trust documents are far more strict and less exciting. Why? Because Grandma’s assets usually end up with the State or health care provider.
None the less, a Special Needs Trust is for Grandma when she has a disability and is older than 65 years of age. The reason Grandma might like this type of setup is because it protects her assets through her lifetime. For those wondering, the rules applicable to a special needs trust is a fancy law called the Omnibus Budget Reconciliation Act of 1993, or OBRA.
Grandma’s Revocable Trust is Easy to Covert
Yes, Grandma and her trustee can easily covert or transfer assets from a revocable trust to a trust document described above. Really, it boils down to whether or not Grandma has a disability and her age.
Personally, I like the idea of adding an amendment or clause to a revocable trust granting the trustee this type of control. Other times, people create a supplemental needs trust, fund it accordingly and lean on their trustee(s).
If I have described you or your situation, please contact me directly.