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Estate Plan Can Help Beneficiaries in Uncertain Times

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Posted on Jun 30, 2017 | Share this post: Like Us on Facebook Join Us on Google Follow Us on Twitter

Unless you have successfully turned off the outside world, you have heard about the effort to reform or repeal the Affordable Health Care Act, aka Obamacare.  The many questions surrounding the future of our health care system bring up valid estate planning considerations.

One concern is whether many people may end up without insurance, become uninsurable, or face high medical costs.  With the uncertainty of the future of health insurance, it is important to consider ways to protect beneficiaries against losing their inheritances to medical bills and protect against an inheritance causing a beneficiary to lose government-provided benefits including health insurance.

Sometimes, we know a relative might have a disability or be receiving help from federal or state government.  It is of course difficult to predict the future.  You may have a family member who is currently healthy and insured, but later develops health issues that cause job loss and/or disqualification from insurance.

One strategy that can help loved ones is to leave their inheritances in trust instead of outright.  Our firm refers to these trusts as “lifetime protection trusts.”  The arrangement, which provides tremendous flexibility under Arizona law, allows a beneficiary to be his or her own trustee and be completely in control of the funds.   Plus, these trusts offer the beneficiary creditor protection.  Hence, if a beneficiary incurs high medical bills, the creditor can’t get to them.  If a beneficiary needs funds to pay for medical care, he or she can choose to use the money those purposes, but a creditor can’t force money out of the trust for payment.  The trust is protected from creditors by the terms of the trust and by Arizona law—even if the beneficiary lives in another state.

If you have a beneficiary who receives government-provided health care, such as Medicaid, or any other means-tested government benefits, a “lifetime protection trust” may not be enough to preserve those benefits.    In such cases, you should consider putting money into a “Special Needs Trust” to maximize the chance that they will not be disqualified by the funds you are leaving.

Right now, it is impossible to know who might lose health care so it’s one of those times to plan for the worst and hope for the best.  If you have concerns about protecting your beneficiaries, please feel free to contact Bogutz & Gordon (520-321-9700) to review your plan and discuss your concerns.