What is a trust mill attorney? Thanks.
Iâm assuming the comparison is to a âpuppy mill.â So, lawyers who just put out really poor trusts that donât meet the needs of their clients and just take their money.
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âTrust millsâ crank out trusts at low cost, nominally under the supervision of an attorney. The trusts usually are not tailored for the individual and generic. They can cause problems down the line - because the clients donât understand what they do, and generic may not work for them. If your trust resulted from a free steak dinner, buyer beware. Also âdocument preparersâ who arenât attorneys can be problematic for the same reason. They donât know the questions to ask, and canât give legal advice.
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my folks got one of those Trusts for a steak lunch. It was 90+ pages long, and much the boiler plate was not applicable to the folks. After the second parent passed, I had a long call with the firm that wrote it, and the 2nd in command at the Firm could not explain what the purposes were of several sections, or more importantly why it looked like that clauses for the Family Trust and Survivor Trust were crossed. (she said that the attorney who drafted it has himself died and they did not have his notes. But, theyâd love to take me on as client to guide me in the Executor role. Uh no thanks. Instead, I paid a different Trusts/Estates attorney $900 to draft summaries of what the conflicting clauses meant for the banks.)
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Holy cow. That sounds just awful. I was worried about that for my Dadâs trust. When we did our wills and things, we set up a trust for the life insurance, I bet itâs that type of thing done based on a template. In the process of updating all that stuff with a specialist ( rather than the lawyer paid for as an employee benefit).
I paid a lot more in 2011 for a trust, I then read more stuff on Bogglehead forum and made an appointment to talk to my lawyer, he explained everything to us in details, we both understood what he wrote. But heâs old, but this is a big firm, they have lots of people to carry on his work.
I still donât know if I should have a trust, a will is fine, health directive is fine, but I think itâs simpler to do a TOD for the real estate portion. All of my accounts have beneficiaries. But I stop worrying about it now.
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I donât have a problem with templates, btw. I use templates. Most attorneys do. But they are a starting point. Everyone requires personalized documents.
Other warning signs: trusts longer than 50 pages, unless it is a specialty trust. Also (my personal pet peeve), super-fancy fake leather binders. I find an inverse relationship between the quality of the document inside and the fanciness of the packaging outside (no flames! ymmv, and there are certainly great attorneys who use fancy binders). I find those binders annoying- they donât fit in safe deposit boxes or file cabinets. Not everyone wants their estate plan on display on a book shelf.
Trusts certainly arenât necessary for everyone- if you only have financial accounts and those accounts have beneficiaries named, you are probably ok. But again - states are different on what is required. Donât rely on some strangerâs advice on the internet! 
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Iâve been of the same mind. PoD/ToD can work great, but leaning towards a Trust for the personal residence. I was surprised how easy it was to sell the parentsâ CA house in the Trust. (It might be just as easy to sell a house under ToD, but I have no direct experience. ToD in CA has some restrictions which may or may not be relevant to your situation. Moreover, ToD for real property is rather recent in CA, and there is no guarantee the state wonât make changes in the future.)
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@kjofkw - I was looking for a list of fee only advisors too. Someone here recommended this link. I cannot speak to it (havenât investigated) but it looked promisingâŠ
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Thanks! Will take a look. Appreciated.
_KJ
My personal opinion is I dislike Medicaid trusts.
I have spoken at many client events (usually on retirement and tax planning) and someone would always ask me about Medicaid trusts.
Im not speaking specifically about its efficacy but about the basic principle.
People want to transfer money from the parents to the kids so that taxpayers can pick up the bill when they have the assets to pay for it. If you really want to preserve assets, consider life insurance. Many life insurance policies have chronic care (or LTC riders) available if the insured cant perform 2 or more of their ADLs (I do not sell Life insurance). Medicaid is meant for poor people.
This is just my personal opinion.
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I agree with this ⊠sort of. There are lots of fancy tax planning opportunities for people to pass on wealth for those whoâŠ. have wealth. For those that donât have wealth (not just the poor), not so much. Transferring generational assets shouldnât be just for the wealthy. Medicaid is one of the few programs that can protect assets from being decimated by long term illness. I donât see it as that different than estate tax planning at its core. Our generous estate tax rules impact our tax coffers a helluva lot more than Medicaid, for people who donât need the help near as much. And besides, I think it is horrible how little support we provide our elders in this country. Getting old is expensive.
But donât come to me to do medicaid planning if you are looking to shield millions in cash. Save your house you worked your whole life for? Sure. Protect your well spouse from living in poverty? I got you. Protect a lavish lifestyle? Nope.
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I just had a conversation with my neighbor. Sheâs 88 and her husband passed away 1 1/2 years ago. Sheâs accepted that the house is too big for her to take care of. She also owns a condo that her daughter lives in so she and her daughter would live there. Sounds like a sound plan.
But she doesnât want to sell one of the two homes she owns until she can âprotectâ the house sale if she needs to move into a nursing facility.
2 of her 3 children have done exceedingly well, own multiple homes and take lavish vacations. All the kids are retired, the one she lives with hasnât been as successful but the estate would be divided.
I wonder how I will feel when I get that age.
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Sorry, you added this while I was responding. The problem with ltc insurance is (a) it is expensive and not as available as people think depending upon your current health, (b) the vast majority of people never actually get to use it, because relatively few people live long enough once they are sick enough to trigger it to make it through the waiting period (c) good luck getting your insurance company to acknowledge your inability to do the adls, (d) they donât cover the entirety of the expense of long term care, especially in home care (e) these days policies only last a few years and donât have sufficient cost of living adjustments.
Obviously I donât sell insurance either, lol. Ironically, DH uses his LTC insurance (chronically disabled at 52 yo), and it has been a godsend in that he has enough paid care (4 hours a day) that I can still work outside of the home. But if someone is expecting it to pay for all of their care and protect their assets? Think again.
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I was referencing life insurance with chronic care or LTC riders and not LTC.
LTC was great for many years but actuaries mispriced the product. In insurance, there are given assumptions of how many people will give up (surrender) their policies. These help support profitability. People who bought LTC policies mostly kept their policies inforce. Consequently, companies got out of the LTC business and started selling off their liabilities. Many people with existing policies have seen dramatic price increases. Not sure if this affected GEâs decision to spinoff Genworth as they were one of the major LTC carriers.
In lieu of traditional LTC, life insurance companies began adding chronic care and LTC riders. Essentially, you add the rider for a reduced death benefit (maybe 10%) or higher premiums. You get a monthly amount of money (up to the IRS per diem amount) from the life insurance company if you meet certain qualifications (ie 2 of 6 ADLS). Some are indemnity plans. For many life insurance companies, itâs like an accelerated death benefit claim since most people who canât perform 2 of 6 ADLs usually pass away within 5-7 years.
I donât sell life insurance so Im not sure what the current trend is regarding these policies.
These are the type of discussions a good financial advisor should discuss with their clients if asset protection for their spouse is an important issue. However, there are some advisors who are hesitant to discuss insurance because they dont want to appear to be an âinsurance salespersonâ. Also, unlike Advisory business, these type policies are usually commission based and many advisors donât (or try to stay away from) commission based products in the name of âobjectivityâ.
DISCLAIMER: I am not providing advice. Please do your own due diligence and consult with your own financial consult, tax and legal experts.
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Re: trusts.
Make sure the trust very clearly states who the trustee will be.
This seems obvious (even to a non-attorney like me), however this was not done in my family and it resulted in a prolonged, expensive, and bitter legal battle.
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We looked at long term care in our late 30âs/early 40âs. It was outrageously expensive. And a better investment was to save that money so that if things happened and in home care was needed that some( though likely not enough) money was available. Sadly, it seems rare that someone has LTC if/when they ever need it. @CateCAParent Glad you had it.
We really thought it was particularly important esp when kids were tiny just couldnât make the numbers work.
We also found that companies no longer offer LTC solutions as part of their benefits. Some do, but they are more stringent than ever.
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I have mixed feelings about this. Honestly, I donât need the money from our parents houses and neither does my sibling. But many people do. So on the one hand, I wouldnât give Uncle Sam anymore money than has already been paid over many decades. But then again, it does seem crazy that some things can be âprotectedâ from inheritance taxes and others like an IRA cannot.
Letâs face it, most people do not spend the $ to get the appropriate trusts, wills, estates etc unless they have a lot of money. That leaves most people paying the taxes because they didnât plan. And the planning is basically just taking advantage of loopholes in the system that allow one person not to pay because they filled out a form. Not ethical but finanically effective.
The issue to me seems to be, why does it cost so much for nursing home care? And why canât it be covered under insurance like health care?
When it comes down to it, money can always be donated. My personal leaning is Iâd rather donate an inherited sum than give it to the government to spend. So weâre doing all the tax planning we can. ( I do think many tax loopholes including mortgage tax deduction and all the rest, benefit one group of people at the expense of another).
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I admit I donât know a lot about these modern, blended products. Iâve had clients with them, but havenât seen what happens when they try to activate the ltc component, nor have I read over their contracts. My general skepticism is that insurance companies arenât offering the products if they werenât money makers for them. But if the trade off is a lower death benefit it might be worth it, depending upon your other goals for the insurance. Other people choose to self-insure. It would behoove people to do the math comparing how much the policy costs over its life, the cost of care, and what the policy will actually pay out.
One thing that happens often is even though someone may qualify with 2 adls, they put off activating the coverage. They donât want to do it too soon, for fear it will run out. People die without getting the benefit they are entitled to, because it isnât always obvious when to start it.
I have been around long enough to have lived through the consolidation of the ltc market resulting from the bean countersâ miscalculations on how many folks kept their coverage. The policies now are a shadow of what they once were.
Back to Medicaid for a sec - just a reminder that what state you are in matters. The law is changing in California - and only California- starting in July, so that you can have approximately $130k in the bank instead of $2k and qualify. That is a serious game changer, and hopefully will mean more people will qualify for in home care support- keeping more folks out of skilled nursing (which is much more expensive for the tax payers). I would think it would also impact who needs the ltc rider on life insurance.
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Ok, I donât know why nursing homes donât cost even more than they do.
Say my spouse and I need round the clock care (diapers, dementia, all the fun stuff). We get another oldie to room with us as I think aide can take care of 3 of us 8 hour shift. 5 8 hour shifts per aid. Thatâs 4.2 FT employees. Say thatâs 70k/employee (with benefits). Thatâs over 280k/3 - near 100k per person and thatâs without meals and accommodation expenses.
This is why it would break the insurance system to have it fully funded for all at the care level that we would all want.
I donât know that Iâd care to live any longer if I couldnât get a decent level of care.