Setting up a living trust for elderly parents can ensure your loved one is protected from fraud or mismanagement as they age or become ill. It can also provide numerous perks for you. For example, putting elderly parents’ house in trust will save you from the hefty fees of probate costs, which can be up to 3% of the asset’s value. However, setting up a trust can be complicated so it’s important to arm yourself with as much information as possible.
In this post, we will review setting up a trust fund for your parents and answer some of the following questions:
- How long does a trust take to set up?
- How do you set up a trust for parents?
- What are types of trusts for elderly parents?
Setting Up a Trust for Parents
When it comes to setting up a trust for elderly parents, there are a few things you should keep in mind. Below, we will review how to set up a trust for a parent:
- List their assets (house, car, stocks, life insurance policies, etc.) and decide what you want to include.
- Gather all necessary paperwork. This includes stock certificates, life insurance policies, and all titles and deeds of property.
- Decide who will be the sole grantor. Your parent can only put property they own into the trust so if they are married, they will want to draw up a shared trust.
- Choose beneficiaries such as yourself or other siblings.
- Choose a successor trustee who will pay debts and distribute assets according to your parent’s wishes upon incapacitation or death.
- Prepare the trust document according to your state’s legal statutes and then sign and notarize. You can also do this with help from an attorney, financial advisor, or a financial investment company.
- Have your parent transfer property to themselves as trustee.
- Keep the living trust up to date by revisiting it after births, deaths, marriages, divorces, etc.
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Types of Trusts for Elderly Parents
We now know how to fill out a living trust but what type of trust should your parent get? Here are some examples:
- Irrevocable Living Trusts: This trust is useful when your parent is applying for Medicaid so they don’t have to dispose of their assets to become eligible for nursing home care or health care coverage. Your parent will be allowed to hold onto assets to pay bills and still qualify for Medicaid and make sure their spouse does not lose their home upon the former’s death. With this type of trust, the parent has a say if it is revoked or revised.
- Revocable Living Trusts: In contrast to an irrevocable trust, a revocable trust allows the grantor to revise or revoke the terms at any time without the beneficiaries’ consent. This trust offers an extra layer of protection for your parents because it makes it more difficult for non-trustees to mismanage money. It can also be revoked in court if your parent is unable to control their assets at any time or if the grantor objects. It takes about 2-4 weeks to get this type of trust in place and then another few weeks to six months to get it fully funded.
- Testamentary Trusts: Upon the death of a spouse, assets are transferred into a testamentary trust and allow the trustee to make all financial decisions regarding their assets. Your parent will have no control over their finances and will be protected from money mismanagement, which often results from grief or fraud attacks.