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Jewish World Review April 28, 2005 / 19 Nisan, 5765 How do I protect my slacker son's inheritance?; Curbing Medicare costs By Jan L. Warner & Jan Collins
http://www.JewishWorldReview.com |
Q: My husband and I have two sons who are exact opposites. One is 45,
married to a teacher, has two children and never misses a day of work.
The other is 38, can't hold down a steady job, has been married three
times (resulting in five children), is always behind on his child
support and is usually broke. We have a wonderful relationship with our
older son's children, but never see our younger son's because he is
always behind on his support payments.
Assuming there is something left to leave when the second of us dies, we
want our assets to be divided equally between our sons. But we're
concerned that our younger son will either blow what he inherits or a
creditor will take his funds. Is there a way to protect our younger son
from himself?
A: When your child or another potential beneficiary of your estate is a
spendthrift, and you want to make sure that the funds you leave will be
used as you intend, it is wise to include a "spendthrift" provision in
your trust.
For hundreds of years, "spendthrift" trusts were used by the English to
limit beneficiaries' access to money so they could not squander it and
their creditors could not touch it. These trusts were used by anxious
fathers to keep inheritances, designed to benefit their married
daughters, away from their sons-in-law and creditors (because, in those
days, married women could not own property in their own names).
Today, every trust created by one person for the benefit of another
should contain a spendthrift provision directing the trustee not to
distribute any sums to a creditor of the beneficiary. In some trusts,
the spendthrift provision has been expanded to direct that the trustee
pay "necessaries" for the beneficiary by making payments directly to
third-person providers for the beneficiary. Necessaries include such
expenses as food, shelter, utilities, medical and dental care. This way,
the funds never touch the beneficiary's hands and generally can't be
grabbed by creditors before the monthly expenses are paid.
While a spendthrift clause may help beneficiaries who are unemployed,
have creditor problems or, like your son, many former wives, state law
may limit the applicability. For example, some states don't allow these
provisions, while others place limits on the amount that can be
protected from creditors. A number of states permit those vendors who
supply necessaries to make claims against the trust. Still others permit
enforcement of valid court orders and judgments for alimony and child
support.
No spendthrift provision protects the trust's assets from claims by the
Internal Revenue Service or state departments of revenue for past-due
taxes, penalties and interest. And whether these provisions protect
trust funds from plaintiffs in personal injury lawsuits is in flux.
Talk to a lawyer in your area who is knowledgeable about your state
laws, and then take the steps that will provide as much protection as
available.
CURBING MEDICAID COSTS
The governors of our 50 states have been working feverishly to present a
Medicaid reform proposal to Congress that will reduce the benefits of a
program now covering 53 million poor Americans. Despite the
ever-increasing numbers of seniors on fixed incomes who become
chronically ill, the governors are trying to reduce the number of people
who seek Medicaid benefits, but not a word has been said about the
growing number of illegals who come into this country and take advantage
of these programs each year.
This new package will probably offer even fewer benefits to the working
poor and uninsured, meaning that some people will not get treated, and
those of us who use traditional health coverage will continue to be
gouged by higher premiums. Moreover, to reduce the states' expenditures
on long-term care and nursing homes, the governors plan to "clamp down"
on what they refer to as "wealthy seniors" who transfer assets to
qualify for Medicaid.
The governors' solution for these "wealthy seniors" of undefined means?
Give them tax credits to buy long-term care insurance (which most can't
qualify for or afford), and allow them to "... keep some percentage of
their home, some amount of fixed dollars that they can pass on (to their
children) and then encourage reverse mortgages to pay for their
long-term care." Reverse mortgages, governors, can't be used when folks
are in nursing homes and the house is empty. And why not suggest instead
that the more than $22 billion per year that will be lost if estate
taxes for the really wealthy (the richest 1 percent of Americans) are
repealed be used shore up programs for the less fortunate?
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JAN L. WARNER received his A.B. and J.D. degrees from the University of South Carolina and earned a Master of Legal Letters (L.L.M.) in Taxation from the Emory University School of Law in Atlanta, Georgia. He is a frequent lecturer at legal education and public information programs throughout the United States. His articles have been published in national and state legal publications. Jan Collins began co-authoring Flying SoloŽ in 1989. She has more than 27 years of experience as a journalist, writer, and editor. To comment or ask a question, please click here. © 2005, Jan Warner |
Arnold Ahlert | |||||||||||
