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Posted on Friday, September 9th, 2016 by Peter Klenk

From Our “Ask a Question” mailbag: “I have been diagnosed with early stage Alzheimers. I have heard that setting up an “unfunded trust” for long-term care might be a good idea. What is an unfunded trust and how is a trust that is unfunded useful?”

Consider an unfunded trust for long-term-care

When planning for Alzheimers, the term “unfunded trust” refers to a Revocable Living Trust which you set up but in which you currently put no assets. Because it is currently not “funded” with any assets, we call it an “unfunded trust.”

Consider An Unfunded Trust When Planning For Long-Term Care

A Revocable Trust can be an excellent tool when you need help with your finances. A “Revocable” Trust can be “revoked”, which means that you can modify or completely void the trust at any time. By forming a Revocable Living Trust, you create an entity into which you can transfer your bank accounts and real estate when needed.  During your lifetime the trust is for your benefit.

Typically, when planning for long-term care for Alzheimer’s disease, you would name yourself as a trustee along with another person or institution as co-trustee.  You select a fiduciary who has your best interest at heart. Typically, the trust language allows each trustee to act independently. Both you and the co-trustee can act alone to invest or pay your bills. While you are still able to handle your affairs, you do all the work.  When you are no longer able to manage your finances, your co-trustee can seamlessly take over.

Your Agent Can “Fund” The Unfunded / Revocable Living Trust When You Are No Longer Able

An “unfunded” Revocable Trust refers to a Revocable Trust that you sign, but you don’t currently fund. You may wish to leave your assets in your name for now. However, you give your Agent, under Power of Attorney, the right to move your assets into the Revocable Trust should you become unable to make decisions yourself. When assisting a person with Alzheimer’s, having assets in a Revocable Living Trust is sometimes much easier and less time consuming than using a Power of Attorney alone.  Often people become reckless with their finances as cognitive diseases progress. Using an Unfunded Trust is a good way to protect yourself when you may no longer be able to do so. Whether you fund the Revocable Trust currently, or you leave it unfunded for now, is a matter of strategy and personal preference.

Contact our office for a free consultation if you have further questions about Unfunded Revocable Trusts or any other Estate Planning issues.

Wills, Trusts and Probate, and Estate Litigation it’s all we do!

Peter Klenk, Esq.

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