Legal Question in Elder Law in Iowa

Re: living trust

If by a "living trust" you mean an inter vivos trust (i.e. a trust that is funded and administered while they are still alive), before they go to the trouble and expense of creating such a trust AND transfering all their assets into it AND administering it annually such that all new assets go into the trust; they should first ask what they want this trust to achieve and is it worth it in their particular situation.

The main reason people choose such a trust is probate avoidance (other reasons include protecting life insurance proceeds from estate tax through a "Crummy" provision, and other estate tax avoidance measures that require special provisions and that often can also be accomplished with a testamentary trust (i.e. one that is not funded until after at least their first death) instead).

Probate is not as slow and expensive as it used to be. After discussing what will be needed to create and maintain a living trust, likely probate costs based on their individual assets, and the fact that probate is often still needed because not all assets are owned by the trust at the date of death; many people choose against such a trust.

If they want it to increase the chances that they will qualify for Medicaid if they have to go to a nursing home, they will find that this is much more difficult than it used to be and that assets that they transfer away may actually disqualify them from medicaid coverage for a significant period of time.

The bottom line is that it is impossible to say whether a living trust is appropriate for them (and what provisions it should have) without reviewing their assets and discussing their goals and what estate planning documents can and cannot do.

Just as important, they should be sure they have effective durable powers of attorney and health care directives (sometimes called "living wills") to be used in the event they become incapacitated (a statistically quite likely thing).

I suggest that they contact a lawyer competent in estate planning or "elder law" to discuss these things rather than doing things now without appropriate advice that will later have consequences no one wants.

Please feel free to e-mail me directly if you have further questions.