Should I Do a Will or a Living Trust? Part Two

If you read yesterday’s post, you’ll know that wills and living trusts each accomplish three goals, but they are not one and the same. Neither document is likely to be a comprehensive solution for all your needs, so you’ll need to consider what time period you are planning for. canstockphoto10979354

If you are looking simply to plan for what happens after you pass away, both a will or a living trust can be a good option. If incapacity, however, is your primary concern, a living trust is far and away the more superior tool. Many people focus on what happens after they pass away when it comes to estate planning, but disability and incapacity are increasingly important concerns regardless of your current health.

Assets inside a living trust will already be under the control of a trustee you named to manage things in the event of your incapacity, this allows for a smooth and quick transition. Rather than having to wait out months in a legal disability proceeding, you’ll have a trustee who is empowered to act right away. There are a few other reasons that a living trust wins out over the will, such as if you have a vacation home or real estate located in another state. This is because you won’t have to worry about the estate being probated separately in each state after you pass away, so long as the property is inside the trust.

As you can see here, neither one of these tool is an all-encompassing solution, so you should talk about your needs with an experienced estate planning attorney. We can help at info@lawesq.net

Living Trusts: The Importance of Proper Funding

If you have decided to use a trust to pass on your assets, this can be an exciting decision that gives you peace of mind about the firmness of your plans. If you don’t ensure that the trust is properly funded, however, it’s unlikely that your trust is going to carry out the plans that you intended.

If you already have assets inside the trust, make sure that you set up reminders to continuously review your materials and always have unfunded or new assets titled into the trust’s name. Don’t ever assume that these changes have been made, since the ownership of verification falls squarely on your shoulders. Keep copies of documents that confirm your changes so that you are always clear on what’s been taken care of already. If values have also changed, ensure that is updated as well.2014-10-20_1448

If an asset that you used to own has now passed onto someone else through a sale or closure, make sure it’s removed from your funding portfolio. This makes it easier on your family members in the future and the trust executor so that they are not searching for assets that are no longer present. To review your funding in your living trusts, get in touch with us through email at info@lawesq.net or over the phone 732-521-9455

Lessons from the Joan Rivers Estate

Joan Rivers was heralded as a stellar performer, but she also left behind a legacy as an incredible businesswoman. Her estate included income, collectibles, and real estate that was estimated in value between $150 million and $250 million. She left behind detailed instructions for her assets after her death, which is rare in a society when many celebrity deaths highlight the weaknesses of their estate plans. Photo Credit: breitbart.com

Looking at her careful planning, there are a few key lessons: be prepared for the unexpected, outline plans for pets, and correctly title the assets. Joan Rivers was also masterful in giving her family a brief overview of the estate plans to help improve clarity and reduce the possibility of arguments. Rivers made use of family trusts to reduce the tax burden for her beneficiaries and titled her assets

appropriately to allow for the smooth transition of business assets. This act alone helped to diminish her capital gains taxes.

Regardless of the size of your estate, proper planning allows you to pass on assets to your heirs in the most efficient manner while minimizing the tax liability. Contact our offices today for a consultation for your business and personal needs through email at info@lawesq.net or contact us via phone at 732-521-9455.

Especially For Those In N.J. & C.A.: Personal Tax Inversions to Avoid State Income Taxes

Take a look at the articles out there on either side of the issue and you’re likely to find compelling arguments for and against the use of corporate tax inversions. Some believe that tax inversions are not patriotic, but others see the issue as maximizing gains while “playing the rules” of the tax code game. Did you know that there’s a personal tax inversion you might be able to use to save hundreds of thousands (or more) on your state income taxes? It’s not right for everyone, but in the right situation can be a valuable tool.

In this situation, you can reap the benefits of having your assets located in a different jurisdiction, preferably one with no state income tax at all. A personal tax inversion, however, might be even simpler, because it doesn’t require you to transfer assets outside the country- just to another state. This can be done through a non-grantor trust. You are in some sense not really seen as the owner of the trust for tax purposes. Ensure that you work with an attorney who understands what, if any, gift tax implications there are of making such a move. The attorney drafting your paperwork should explain this to you and make you aware of whether you will be subject to gift taxes in exchange for giving up the burden of being hit with state income taxes. To learn more about non-grantor trusts, give us a call today at 732-521-9455 to get started.

Especially For Those In N.J. & C.A.: Personal Tax Inversions to Avoid State Income Taxes

 

 

 

 

 

 

 

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Robin Williams’ Trusts Call for Conversation About Trust Privacy

The loss of Robin Williams last week certainly sent ripples across the country, but it also highlights an important topic for your estate plans: privacy. Within a matter of hours after news outlets started reporting his death, details about the trusts documents he had established for his three children started emerging as well. The prime sources for these details? Gossip websites and tabloid. One site even published a 35-page document detailing Williams’ irrevocable trusts established for his children.

Shortly after these documents, one of which dated back to 1989, hit the media, Williams’ publicist responded that neither of them were accurate with regards to the former actor’s current estate plan. What’s most disturbing, however, is that trusts are most often used instead of wills because of the veil of privacy they offer.

So how did Williams’ documents, albeit outdated, end up in the public eye? The trustee of both the trusts had requested a co-trustee successor be appointed back in 2008, when the originally designated individual passed away. All of the public sharing of the trust document could easily have been avoided simply using trust protectors, like an accountant, trusted friend, or attorney who retains the power to appoint or remove trustees. To learn more about ensuring that your trusts are protected privately, contact our offices at info@lawesq.net or via phone at 732-521-9455 to get started.

Robin Williams’ Trusts Call for Conversation About Trust Privacy

 

 

 

 

 

 

 

 

 

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Do I Need a Trust?

As trusts have gotten more popular and evolved in type to appeal to a lot of people, so now you might be under the impression that you must have a trust. While it’s not for everyone, there are so many trusts out there that it’s very likely you could find one that will help you to meet your goals, including to protect your assets and minimize taxes.

Do I Need a Trust?

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Major liquid assets, setting up care for a child with special needs, and a variety of real estate ownership are a few of the reasons that people might initially turn to trusts. If you’re a resident of a state with a high state estate tax, income tax or probate costs, you’re likely to be concerned about the hit of taxes, too. This refers to situations where a federal estate tax is factored into your asset value, but an additional taxable event occurs at the state level. Without proper planning, you could find that the value of the assets you have worked so hard to build is extremely vulnerable to these taxes and costs.

Contact our offices today to learn more about how these trusts can help you. Send us a message at info@lawesq.net or call us 732-521-9455.

How Did Shelly Sterling Control the Clippers Sale Decision?

The Los Angeles Clippers sale recently seemed to go ahead just the way that most players, fans, and the NBA commission wanted it, leading to an agreement that sold the team to former Microsoft CEO Steve Ballmer for $2 billion. The control behind the sale, however, went to Donald Sterling’s wife, Shelly, causing many to wonder just how she managed it.

How Did Shelly Sterling Control the Clippers Sale Decision
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Shelly made her move with a boilerplate provision included in the Sterling family trust, which maintained ownership over the Sterling’s interest in the Clippers. Since both Shelly and Donald were co-trustees holding equal authority over that trust, she was eligible to make the decision based on another standard trust provision regarding mental competency.

Shelly had already had Donald evaluated for mental competency. Under the trust’s guidelines, if either Shelly or Donald were found by two qualified physicians to have “an inability to conduct business affairs in a reasonable and normal manner”, that individual could be removed as co-trustee. As a result, Shelly would have become the sole trustee with the decision making power and authority to sell or manage the business how she saw fit and that is her strategy.

Whether planning for your family’s assets or for those of an NBA team owner, when in generating trusts’ planning attorneys may recommend that provisions like the one above are put into the language for the protection of both individuals. If not included, the co-trustee (or business partner, as it may be) could be exposed to serious risk in the event of some form of incapacity. If not planned at all, it could all be left up to a court to decide. Get more details about trust planning today by contacting us at info@lawesq.net or at 732-521-9455.

When to Think About Charitable Remainder Unitrust Alternatives

For many individuals approaching estate planning, charitable giving is going to factor into the equation somehow. The most popular way of passing on assets currently is through a charitable remainder unitrust, but it’s not necessarily the best option for everyone, although last year nearly $90 billion was held in U.S. trusts of this type.

When to Think About Charitable Remainder Unitrust Alternatives
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Here are some of the most common reasons that you might want to use something other than this trust vehicle for your charitable giving:

  • Tax Savings Today: You want maximize your current tax deduction. A charitable lead trust could be a better alternative for this situation, since you get an immediate federal income tax deduction when the gift is made. The tax deduction equals the present value of the future income stream.
  • You want the gift to begin now: Under a charitable lead trust, the client will typically gift the assets directly to a charitable trust. That trust then makes regular payments for a specific number of years or for life. Under a remainder trust, though, the charity doesn’t get anything until the trust’s term is up.
  • You want to see regular payouts: This is there’s a difference between a charitable remainder annuity trust and a unitrust. The annuity trust guarantees equal payouts throughout the length of the term (such as every year), which gives the person setting up the trust confidence that payments are being made at regular intervals.

When it comes to charitable giving, you have options. Contact us today to learn more via email info@lawesq.net or 732-521-9455 to get started.

For The Ladies: Special Estate Planning Considerations for Women

For the most part, financial planning and estate planning tools are very similar for men and for women, but there are several facts that result in special planning considerations for women as well. The root of these considerations is that in later years, women may face their own set of challenges.

For The Ladies Special Estate Planning Considerations for Women
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To start with, women tend to live longer than men do. A woman may overlook the fact that odds are in her favor for outliving her spouse. In fact, according to the Census Bureau, nearly 40 percent of women over the age of 65 are widowed. That longevity may also lead to higher medical bills. When your financial future is built on a husband’s pension or Social Security benefits, the woman can face major challenges as a widow.

Women are also much more likely to provide care to children and elderly parents. Many women tend to take on this role for older parents, which can be emotionally challenging and a financial adjustments.

Women looking at estate planning should seriously consider where their income will come from in the future and what, if any, benefits they will be eligible for. If women are looking at caring for their own elderly parents, it’s also worth a look into the parent’s planning to see whether they have made plans for long-term care or factored in the financial aspects already.

A little advance work can go a long way in helping women live long and comfortable lives. To learn more about estate planning, email info@lawesq.net or contact us via phone at 732-521-9455 to get started.

Common Reasons A Will Might Not Hold Up In Court

Especially if you have taken it upon yourself to write your will, it’s important to know that you have opened your heirs up to the risk of having your will contested in court later on. Here are three of the most common mistakes that result in a contested will.

Common Reasons A Will Might Not Hold Up In Court
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Disinheriting Family Members Sans Explicit Instructions

The law tends to treat the distribution of assets relatively fairly when there are questions about intention or mistakes in the handling of the will. So, if you’re stipulating that you want to leave an individual out altogether, you need to make sure those instructions are crystal clear. You want to have this written by an attorney to reduce that chances that you have given such an individual room to argue in court.

Using Biased Witnesses During Your Will Signing

In many circumstances, you need to sign your will in front of witnesses in order for it to be valid. These witnesses may later be called I court to state that they were present and to discuss whether the person signing the will (you) had the mental capacity to sign such a document without any undue influence or pressure from other parties.

Potentially Lacking Mental Capacity to Sign the Will

One of the reasons that heirs (or those excluded) will contest a will is under the ground that you did not have the mental capacity to understand what you were doing. You must understand what property you own, your overall plan for passing on property, and who you closest family members are. Furthermore, a Living Trust, which preserves privacy, may be an option for those with a stronger likelihood of a contest in their future.

To learn more about wills and estate planning documents, contact our professionals at 732-521-9455 or info@lawesq.net.

What Can An Estate Planning Accomplish That I Can’t?

In this world driven by do-it-yourself options, it might seem like you can handle just about anything. There are several things, though, that you definitely want to hand off to a qualified estate planner rather than attempting on your own.

What Can An Estate Planning Accomplish That I Can’t?
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To start with, even the most basic of estate planning documents, a will, probably needs customization. If you’re using some form of template, trying to invalidate it could turn out badly if you don’t do it appropriately. This could mean that your wishes are totally ignored due to an overlooked accident. Each state has specific provisions and wording, so make sure you’ve gotten yours reviewed by someone in the know.

If avoiding probate is one of the goals you have set out for your estate, you really should consider a conversation with an estate planner. The truth is that there are numerous ways to avoid probate and to minimize the blow of estate taxes, but those can be complex and require the eyes of a trained professional. Don’t count on yourself for those strategies.

One of the biggest reasons to trust your planner is because laws in the realm of estate planning have the potential to change often. You most likely don’t want to read through laws and regulations to understand your opportunities and responsibilities, but attorneys are up to speed on all the latest changes. What you can do on your own is to generate a list of what you’d like to accomplish with your plans and draw up questions you have about the process. Being proactive goes a long way towards proper estate planning. To set up a meeting, email info@lawesq.net or contact us via phone at 732-521-9455 to get started.

If It’s Good Enough for the Clintons, It’s Good Enough For You

The Clintons recently made the news simply for taking advantage of Estate Planning and financial planning strategies that maximize wealth and limit the encroachment of taxes. With an estate tax that has an upper limit of 40 percent of assets on death, it only makes sense for those with bigger estates to conduct some planning well in advance.

If Its Good Enough for the Clintons Its Good Enough For You
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One of the most important steps taken by the Clintons was the transfer of their New York house into a residence trust, a move they made back in 2011. These trusts have major advantages, including house value appreciation as an occurrence outside the taxable estate. The overall goal for many estate planning attorneys and other financial experts is to help build up the nontaxable estate as much as possible.

This transfer of ownership of the house specifically is a tool that could have implications for numerous Americans concerned about the tax hit on their estate. A sample strategy involving this plan is to divide house ownership in half and storing that ownership in two separate trusts. While continuing to live in the house, ensure that the trust is structured to pass on to heirs in 10 years. Remember, the growth value during that period falls outside your estate. At the end of the 10 year period, pay rent to the heirs if you plan to continue living in the house. Those rent payments are also shielded by passing outside of the estate, protecting them from tax.

For more tax-saving strategies and long-term financial planning, contact our office today. Call us at 732-521-9455 or send an email to info@lawesq.net

Tips for Choosing a Trustee

Don’t overlook the importance of selecting a proper trustee for your estate planning. Regardless of the type of trust you are planning to use, you need to ensure that you have selected an appropriate individual. In many cases, trustees have a great deal of power and authority and it is not a decision you should take lightly as a business owner or individual.

Tips for Choosing a Trustee
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The gut reaction for many people is to select a child as the trustee. There can be negative ramifications of doing this by dividing the family in the future or by giving authority to someone who hasn’t received the proper advice and education about it. Instead, you may want to give some thought to using a professional individual. Attorneys and accountants, for example, can serve as trustees. They are more likely to understand their responsibilities and bring unique experience to table, but it can be expensive. There are, however, many situations where asking a professional to take control simply makes sense.

As an estate planning client, you should be aware that you can give out powers for beneficiaries to revoke trustee powers and replace him or her. If the trustee is overbearingly restrictive on distributions, for example, the beneficiaries have some options. If there’s no removal power outlined in the trust and the trustee won’t step down, they may be headed to court. As the creator of the trust, you can even outline how often the beneficiaries can exert this power so that it’s not abused. To learn more about trust development and execution, email us at info@lawesq.net or contact us via phone at 732-521-9455.

Time for New Jersey Residents to Reconsider the DING Trust

In light of today’s federal and state income tax environment, those living in high income tax states, like New Jersey, are always looking for options to understand and mitigate risk exposure. In the event that you are influenced by a state income tax, the hit can be substantial. Knowing how to use current strategies is highly valuable for anyone in this situation.

Time for New Jersey Residents to Reconsider the DING Trust
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The IRS has recently made it a little easier to mitigate such risks through the use of a DING Trust, which stands for Delaware Incomplete Non-Grantor trust. In a DING trust, a person can transfer assets are produce high levels of income into a trust. This transfer doesn’t trigger federal or state gift taxes but it also minimizes the exposure to state income tax. The purpose of such a trust is to transfer these assets into a bucket in a state without trust income taxes, like Alaska, Nevada, and Delaware.

This particular kind of trust is best used with someone who maintains high levels of income generating portfolios. For New Jersey individuals in this situation, it’s important to note than an investment portfolio held inside a DING trust is exempt under the state and local income tax so long as the trustee is not a resident of the state of New Jersey. Alongside other estate planning strategies to reduce the overall taxable estate, the DING trust is most appealing to New Jersey residents concerned about the influence of the state income tax. To get started with DING trust planning, contact us through email at info@lawesq.net or contact us via phone at 732-521-9455 to get started.

Do You Have a Digital Fortune?

The estate planning landscape is changing, and it’s because our approach to determining assets is changing, too. According to a survey by McAfee, Americans believe they own an average of about $54,000 in digital assets. Curious about a digital asset? What about your big ITunes collection? Downloaded resources and books on your Kindle? What about Paypal? Bitcoins? Or even more sentimental accounts, like a genealogy archive that’s helped you to identify relatives?

Do You Have a Digital Fortune
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Getting access to these materials can be difficult after a family member passes away. Your email account materials might be deleted before family members can even access the material and in the meantime, your accounts could be exposed to online theft risk.

This is where a Digital Estate Plan steps in. It will help your will executor carry out your wishes in the distribution of your assets. This can be a complex process, since many of the sites mentioned about base their service agreements on federal laws. Nevertheless, it’s an important exercise to gather up an inventory of material you might like your family to be able to access if something happens to you. At the least, your family will be aware of the information’s existence. Login information and passwords should also be included with this material.

Make sure you’re up to date with estate planning laws and trends by working with an experienced attorney. Reach out to us to get started at info@lawesq.net or contact us via phone at 732-521-9455.

Put Your Trust in a Trust

Now is a great time to evaluate how using a trust can help you achieve your financial goals. The federal gift tax and estate tax laws give big incentives for using trusts in estate planning. In the pasts, trusts have been used mostly to transfer gifts to children while limiting estate taxes on wealth, but there are numerous other benefits.

Put Your Trust in a Trust
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An appropriately funded trust can help ensure that your assets are protected and available in the event that you become incapacitated. When you pass away, that same trust can be used to pass on assets to your beneficiaries. You can also protect your legacy by keeping your assets away from any of the heir’s creditors, too.

There are probate savings and privacy reasons that a trust can benefit you, too. There are potentially large fees for going through probate and your probate records will also be public. Putting your assets into a revocable trust instead can keep them from having to go through probate at death- therefore protecting you and your family’s privacy.

Finally, trusts can be a good tool when you live in a state that has an estate tax. Some states levy estate taxes that are rather substantial, but trust planning is one way to cut down on how many estate taxes will be levied on your death. This can also be a good tool for those who have real estate located in a state that imposes estate taxes.

Showdown: Wills vs Trusts

Depending on who you talk to, your estate planning specialist might recommend wills over trusts or trusts over wills. Let’s walk through some of the differences between these two planning tools to see if one might be a better fit for your needs.

Showdown Wills vs Trusts
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If you are planning to use a will as your primary tool, bear in mind that your assets must first go through the probate process in order to be eventually received by your beneficiaries. Some states have lengthy and cumbersome probate processes, meaning that it could take your beneficiaries a while to actually receive the assets. Probate is also very public, meaning that details about your financial situation will be shared in a less-private forum. If you’re concerned about this, a trust might be a better option.

In comparison, trusts tend to pass by the court system for the majority of the administrative process. Since these are privacy documents, there’s less public scrutiny into your finances or your plans, and some clients prefer this confidential approach. Unlike wills, which become active on your death, a trust can be rendered effective immediately. Additionally, trusts can also be used for incapacity planning, adding another layer to their usefulness.

Both wills and trusts can do tax planning for credit shelter trusts. The bottom line is that it depends on your needs. If you are not concerned about the red tape of the probate process, there are still advantages (especially regarding privacy) for the establishment of a trust. We work with clients to create a customized plan for you since we recognize that each client is unique. To talk more about the kinds of trusts we can help you establish or to begin generation of your will, contact us today at 732-521-9455 or through e-mail at info@lawesq.net

3 Estate Planning Mistakes From Which To Learn

If you haven’t already done your estate plan, perhaps hearing a few horror stories about people who made common mistakes will prompt you to do it — and do it right.

Last Will And Testament
Last Will And Testament (Photo credit: Ken_Mayer)

An article in the Green Bay Press Gazette, recounts a few cases that detail classic mistakes involving estate planning, or the lack of it.

  • A former Supreme Court justice wrote his own will, using just 176 words. It cost his family $450,000 in estate taxes and court fees because he didn’t take the time to do it right.
  • Lesson: Know what you know, know what you don’t know.

  • A young woman left her assets to her minor son. When she died, she had $1 million in her estate due to a wrongful death claim. Her son died soon afterwards and the money went to his only heir, his father, who was a drug addict.
  • Lesson: She could have put the assets into trust with a contingency plan were he to die, so the money could not go to the father.

  • A father had a stroke and had to go into a nursing home. His children closed his bank account but never went through his mail. After he died, they found a statement for a $1 million life insurance policy. But the premiums had not been paid since the bank account was closed. They didn’t get the money.
  • Lesson: Make sure somebody knows what assets you have, usually the person who has power of attorney, a trustee named in a trust you have set up or the personal representative named in your will.

These are common mistakes that can be avoided if you engage a qualified estate planning attorney to help you with your estate plan.

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Some Strategies To Shield Your Money

If you wish to protect your money or assets or are about to receive a sudden windfall such as an inheritance, you may want to consider a number of strategies to protect yourself from lawsuits. Simple reason: “The Deep Pockets Theory”; the people with the money are the people who are sued.

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Here are a few strategies, according to an article in the Chicago Tribune:

    1)  Increase your liability insurance. If you are about to inherit $3 million, call your broker and increase your liability policy to protect that additional $3 million. Do it before you get the money. Rates are inexpensive.

    2)  Consider separating assets. You may not want your spouse to have access to your new windfall. If you put the money in a joint account, that is what will happen.

    3)  Protect yourself from renters. If you have rental property or are going to get rental  property, put the property into a business entity such as an LLC to shield your assets from a disgruntled tenant. That way, they can sue the entity for what it has, but cannot go after you and what you have.

    4)  Create a trust and/or business entity to shield your assets. If you do part-time work you probably are operating as a sole proprietorship. But all of your assets are at risk if you are sued.

    5)  Be careful with partnerships. If you have an informal partnership, you are responsible for the actions of your partner. Form an LLC or other entity to provide legal protection.

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‘Gifting’ May Be Penalized By Medicaid

While people can “gift” up to $14,000 each to anyone they want to each year without tax penalty, that tactic is not going to fly if it is being done to “spend down” in order to get Medicaid to pay for nursing home care.

Centers for Medicare and Medicaid Services (Me...
Centers for Medicare and Medicaid Services (Medicaid administrator) logo (Photo credit: Wikipedia)

If a person is “gifting” money to family or friends in order to spend down to reach the resource limit for Medicaid nursing home coverage, it better be done five years ahead of time, according to an article in the New York Daily News.

Gifts made within five years of applying are likely to disqualify the gift giver from obtaining coverage for a period of time based on how much was given. The larger the gifts, the longer the wait.

Medicaid will presume the gifts were made to get around the criteria for coverage.

The penalty period is likely to be in place even if the gifts were put into a trust.

Because Medicaid planning and the use of trusts is complex, the article suggests consulting with a qualified estate planning or elder law attorney.

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