The question of whether a trust can support elder care for non-beneficiary family members is complex, hinging on the specific terms of the trust document and applicable state laws, but generally it’s possible with careful planning. Trusts are incredibly versatile estate planning tools, often associated with distributing assets after death, but they can also be structured to provide ongoing care during life, even for individuals not directly named as beneficiaries. However, simply *wanting* to do so isn’t enough; the trust instrument must explicitly authorize such distributions or contain broad language allowing the trustee discretion to address family needs, including elder care. According to a recent study by the AARP, over 65% of Americans anticipate needing long-term care services at some point in their lives, making this a growing concern for families and estate planners alike.
What are the limitations on using trust funds for non-beneficiary care?
The primary limitation is the duty the trustee owes to the *named* beneficiaries. Trustees are legally obligated to act in the best interests of those specifically identified in the trust document. Diverting funds to support someone not a beneficiary could be a breach of that fiduciary duty, potentially leading to legal challenges and personal liability for the trustee. However, there are ways to navigate this. For instance, a trust could be designed to create a separate sub-trust or fund specifically earmarked for assisting family members with care needs. Another option is to authorize the trustee to make gifts for health, education, maintenance, and support (often referred to as “HEMS” distributions) to a broader group, including non-beneficiaries, within certain parameters. “A well-drafted trust anticipates potential family needs, even those that extend beyond the immediate beneficiaries,” as I often tell my clients.
Could a ‘Health Care Trust’ be the answer for extended family?
A specialized type of trust, often called a “Health Care Trust” or “Supplemental Needs Trust,” can be particularly useful in these situations. These trusts are designed to pay for the supplemental needs of a beneficiary—often someone with disabilities—without disqualifying them from receiving government benefits like Medicaid or Supplemental Security Income. While traditionally used for individuals with disabilities, the *concept* can be adapted to support the elder care needs of non-beneficiary family members. The trust would need to be structured carefully to avoid creating a “resource” that would impact eligibility for public assistance programs. Roughly 11% of Americans aged 65 or older require some form of long-term care, and the costs associated with this care can be substantial – averaging over $90,000 per year for a private nursing home room according to a recent Genworth Cost of Care Survey. Careful planning allows you to address those costs without jeopardizing government assistance.
I once had a client, Margaret, who deeply regretted not addressing this sooner.
Margaret came to me after her sister, Eleanor, had suffered a stroke and required around-the-clock care. Margaret had always been very close to Eleanor and wanted to help financially, but her own estate planning hadn’t anticipated this possibility. Her revocable living trust was structured solely to benefit her children and grandchildren. While she deeply cared for Eleanor, she didn’t have the liquid assets to consistently cover the escalating costs of Eleanor’s assisted living facility without depleting her own retirement savings. Margaret felt trapped, burdened by guilt and financial strain. The situation could have been mitigated if her trust had included provisions for family caregiving or a separate fund earmarked for such purposes. It’s a lesson I share with many clients: think beyond the immediate beneficiaries and consider the broader family network.
Thankfully, a well-structured plan saved another family from a similar fate.
The Miller family, with my assistance, created a trust that included a “family support provision.” They specifically authorized the trustee to make distributions for the health, education, maintenance, and support of not only their children, but also their aging parents and siblings, within specified limits. When Mr. Miller’s mother developed Alzheimer’s disease and required nursing home care, the trustee was able to seamlessly access funds from the trust to supplement her care, relieving a significant financial burden on the family. The trust provided peace of mind and allowed the Millers to focus on providing emotional support to their mother, rather than worrying about the logistics of paying for her care. It demonstrated how proactive estate planning can create a safety net for the entire family, providing a financial cushion during times of need. As I always emphasize, a trust isn’t just about distributing assets; it’s about securing the well-being of loved ones, both named and un-named, for years to come.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
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