Are concerned about how your parents will pay for the basic necessities during retirement, or pay for long term care or uncovered medical bills? If so, there are a number of ways relatively affluent adult children can help. One way is to set up an Upward Trust. This trust is so called because it is for an older generation up the family tree. Most trusts are set up for children or grandchildren, however, this relatively new type of trust can be used to help mom or dad and still have assets find their way to your kids.
The way it works is simple. The adult child creates a trust where mom and/or dad are the primary beneficiaries. The child transfers assets to the trust to be used for the benefit of the parents. Such assets can be used for nursing home or assisted living costs, uncovered medical expenses, travel or basic necessities – really just about anything that would improve the quality of life for mom and dad. The trust can also be structured to allow the parent to qualify for various public benefit programs such as Medicaid and Veterans Aid and Attendance benefits.
After both mom and dad are gone the assets of the trust can then pass to your children, just as you probably already desire. If properly drafted, estate and gift tax issues can be minimized or even eliminated. For those individuals who will wind up helping mom and dad, this can be an effective way to assist while protecting them from fraud and leave something extra for your own children.
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