No one knows what the future holds as they age, but a comprehensive estate plan can help you reduce risk and provide for your own care and for your loved ones. An effective estate plan can not only guard your financial interests but also ensure you receive the level of care you want as you grow older and require more assistance in your life.
The most powerful tool in an estate plan is a revocable living trust (RLT) which provides guidance and assistance to you and your family if dementia-related illnesses or assisted living become concerns.
What is a Revocable Living Trust (RLT)?
A “living trust” is sometimes referred to as a “revocable trust” or “inter vivo trust.” According to the American Bar Association, a revocable living trust generally refers to a trust created while you’re alive. The revocable nature of most living trusts enables you to make changes or revoke the trust at any time.
Unlike wills, which apply after death, living trusts typically go into effect when they are established. Living trusts provide for Successor Trustees, who can help to manage your assets and care should you become disabled, sick, or face age-related challenges such as dementia. The transfer of control of your assets and care can happen outside the court process, reducing cost and facilitating an efficient transfer of your care with the least amount of disruption.
Most often, revocable living trusts do not reduce estate tax obligations. Because you can revoke or amend a living trust, its assets are included in your estate. However, a revocable living trust can help you avoid probate.
A living trust:
- Exists during your lifetime
- Designates a trustee
- Owns property you transfer to it while you’re alive
During your lifetime the trustee is responsible for administering the property according to your direction if you are incapacitated. After your death, the trustee is required to distribute the property to beneficiaries or, in some cases, continue managing the trust in the interest of the trust beneficiaries.
An RLT Offers Advantages During Your Lifetime
A revocable living trust facilitates the distribution of personal property after death. An RLT also plays an important role during your lifetime. A living trust provides a mechanism for administering property while you’re alive, by empowering the trustee to manage the property for your benefit, should you suffer from dementia or become incapacitated.
Without a revocable living trust in place, appointing a conservator may be necessary. When required, a conservator is appointed by the local Probate court and manages your property when you are unable to act on your own behalf. The process of appointing a conservator for your care is called a conservatorship and it is a detailed, lengthy, and complex court process.
Estate Planning for Alzheimer’s, Dementia, and Assisted Living Scenarios
The National Institute on Aging defines dementia as a loss of cognitive functioning. When memory loss, unsure thinking, and reduced problem-solving abilities begin interfering with a person’s daily activities, age-related dementia is often responsible for the decline. In addition to its effects on memory and problem-solving skills, dementia may also impact:
- Attention Span
- Ability to Focus
- Language Skills
- Visual Perception
- Self-Management
Although dementia regularly impacts older adults, it is not considered a normal part of aging. Underlying conditions often associated with dementia include Alzheimer’s disease, frontotemporal disorders, Huntington’s disease, and Parkinson’s. Mixed dementia occurs when a patient suffers from multiple underlying conditions.
Among Americans over the age of 85, one-third reportedly suffers from Alzheimer’s disease. And it is thought 1 in 3 seniors will die with some form of dementia. The statistical prevalence of dementia underscores the importance of proper estate planning to account for the possibility that you or a loved one may suffer from dementia as you age. Failing to adequately prepare for dementia and assisted living scenarios may put your estate, family, and personal care at risk.
It is important to remember that once advancing dementia prevents a person from understanding assets, recognizing family members, or comprehending the purpose of estate planning documents; it may be too late for them to participate in the process.
In its publication, Legal Plans, The Alzheimer’s Association identifies three primary concerns in helping a person with dementia plan for the future. According to the organization, essential considerations include:
- Health care and long-term care
- Financial planning
- Naming another person to make decisions for the individual experiencing dementia
Powers of Attorney
A valid recently executed power of attorney will allow you named agent (the person nominated in your power of attorney document) to make financial decisions on your behalf. This document may either be effective immediately upon signing (durable) or it may only be effective if you are incapacitated (springing). If you have a springing power of attorney, your agent will need a doctor’s note to confirm your incapacity before the document can be used to access any financial accounts you have.
Advanced Health Care Directives
An advanced health care directive is used to communicate your wishes for treatment in case you are unable to do so due to incapacity. The incapacity may be either temporary (as a result of an accident) or long-term (dementia diagnosis). You can state the level of care that you wish to receive and under what conditions. It is important to include details about your care in this document so that your medical team and your family and friends understand your wishes.
Utilizing a Revocable Living Trust
Your revocable living trust is the best vehicle to plan for your future care and to establish pathways for successors and beneficiaries to fulfill your wishes. Benefits of utilizing a revocable living trust include:
- A properly funded trust allows your successor trustees to manage your assets
- You can state your wishes for your care (home care, assisted living options, etc.)
- You can name multiple back-up options for your Successor Trustee, so if any Successor Trustee is unable or unwilling to serve, there are other individuals who can fulfill the role
- A high degree of flexibility in terms and conditions for your care based on your preferences
Establishing a revocable living trust provides for your care and ensures your wishes are carried out, should you experience dementia, or lose the ability to make decisions about your estate. This vital estate planning strategy protects you and your partner during your lifetimes and seamlessly passes assets to your beneficiaries as directed by the trust upon your death, avoiding a lengthy and costly probate process. In addition, utilizing an RLT can help avoid the costs and delays of conservatorships.
Norton Basu LLP can help you weigh the benefits of a revocable living trust and other features of a comprehensive estate plan.