Reverse Mortgages- There Goes MetLife

The largest reverse mortgage lender, MetLife, no longer offers reverse mortgages. It has sold its reverse mortgage division. Reverse mortgages have helped many seniors stay in their homes. It is a way that in an appropriate case seniors can take equity out of their homes through a reverse mortgage but continue to live there as long as they wish without having to make monthly mortgage payments. The loan is repaid from the proceeds from the ultimate sale of the house when the senior dies or no longer lives there but the senior is never liable to personally pay the mortgage. The drop in housing values has made such mortgages less appealing to mortgage lenders.

What does funding a trust mean?

     I find, and my colleagues all around the country report, that too often people set up lifetime trusts without funding them. They don't realize that merely creating a trust isn't enough, and that they need to follow the necessary steps to formally "fund" the trust. Funding a trust means actually placing money or other assets in a trust, generally by re-titling them in the name of the trust. To make sure that a living trust is funded during a person's lifetime you usually start the trust with ten dollars and then add other assets when you are ready. Additional assets may be added during your lifetime and/or assets may pour-over into the trust at death through your will. What you do to create a funding plan is based on advice from your attorney and any financial advisors.

     It also is possible (but not required) to provide that other people can contribute assets to the trust you set up. Those contributed assets will be divided among the trust beneficiaries in whatever way you determine when you set up the trust terms. The third party additions to the trust cannot change the trust terms or add additional terms, because it is your trust. You will already have established all of the terms, and someone adding to the trust if you allow additions will know what terms you have selected. You do not have to allow a third party to add to the trust, and the trust can contain whatever terms you decide on with your attorney as the best course for you. Whenever you are doing estate planning, no matter how large or how small your estate, it should reflect your goals and your values, and it is your wishes that count.

What is the difference between a living trust and a testamentary trust?

     As lawyers, we get so used to using terms that we often don't think to explain the terms we use. An example of this is when we talk about living trusts and testamentary trusts.

     A living trust is a trust that you set up and fund (at least partially) during your lifetime. This kind of trust comes into existence while you are still alive.

     A testamentary trust is a trust that you create through the terms in your will. Because a will has no effect until you die, a testamentary trust is not considered as being made during your lifetime even if you sign the will directing that the trust be set up at your death. You may want to create a trust in your will for tax purposes or because there are minor or disabled persons who may inherit from you or because you feel that one or more beneficiaries would not be able to manage the inheritance on their own.

     A really interesting aspect of testamentary trusts is that at times it is possible to accomplish objectives through a testamentary trust that cannot be accomplished through a living trust. For example, if you live in Virginia and are concerned that your spouse may need longer term care and you don't want your spouse's ownership of assets or receipt of an inheritance to pay for expenses that Medicaid could be expected to cover, you can set up a Special Needs trust that will be more effective if created in your will than if created during your lifetime.

     An elder law attorney can help you decide whether you need a trust and, if so, whether it should be a testamentary or living trust and what terms to include.

What is the difference between a revocable trust and an irrevocable trust?

     I often am asked this question, because it is a really important one to understand. Revocable trusts and irrevocable trusts have different purposes, and an estate planning elder law attorney can help you choose the type of trust you should have if you need a trust. Usually the reasons for creating a revocable trust include goals such as avoiding probate, providing privacy, discouraging wills contests, or providing for management of assets. On the other hand, the purpose of an irrevocable trust most often is to provide asset protection or to help a person be in a position in the future to qualify for government help with long term care expenses for which there is no health insurance. This may include planning for Medicaid or for Veterans benefits for Aid and Attendance for a Veteran or Veteran's widow.
     It is important to understand that a key difference between a revocable and an irrevocable trust is whether or not it can be changed by the person setting up the trust. When you set up a revocable trust you can change it or terminate it whenever you want (as long as you are competent). When you set up an irrevocable trust, by its nature, it cannot be amended or changed (except in very limited circumstances).

     An elder law attorney can help you decide whether you need a trust and, if so, whether it should be revocable or irrevocable based on your particular needs and circumstances.

Should you have a trust as part of the estate planning process?

Many people have heard of living trusts and other types of trusts, but they are not sure if they need one. There are good reasons to have a trust or not to have a trust which an attorney can explain in a consultaiton based on your particular facts. Some of the situations where people frequently choose to create a trust are where there are minor children or a disabled family member, where long term care is a concern, where they want to avoid probate, where there is a concern that someone might contest a will, or where there is a desire for managment and consolidation of assets. Often where one or both person in a couple have children by a prior marriage a trust can be a good idea. A trust may or may not involve tax planning. You do not need to be wealthy to need a trust, but where wealth is involved, tax considerations may come into play in designing an estate plan and trust that is right for you. Consultation with an estate planning attorney can help you determine what plan best fits your needs.

Which takes priority a will or a beneficiary designation?

Many people making a will think that the will controls everything. That is not the case. The will does not trump beneficiary designations, payable on death designations, or transfer on death designations. Nor does it control how property held  jointly with right of survivorship passes. This means that if a house or a bank account is held jointly with right of survivorship with another person, that asset passes to the survivor no matter what the wills says. Similarly, if life insurance or a retirement account is payable to a named beneficiary it passes to that beneficiary and is not affected by the will. There are other wrinkles in the law that affect how property passes, such as creditors rights or augmented estate rights in Virginia. This is why making a will should be part of a planning process involving consultation with an attorney and it should not be just a creation of a document without an understanding of the legal aspects that an attorney can explain. You do not need to be wealthy to make a will or to benefit from consulting with an estate planning attorney.

What is a will?

A will is a document that tells how your assets pass when you die and that names the person(s) who will handle your estate. A will speaks as of the time of death and has no effect at all while you are alive. A will can be revoked or changed during your lifetime as long as you are competent. Once someone reaches the point that they don't know who their relatives are, don't know what they own, or can't understand that in signing a will they would be leaving their property to the beneficiaries they name, they no longer can make a will. Every adult should have a will in place to make things easy for their loved ones.