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Establish Trust For Grandchildren

February 6, 2013

Question: My wife and I have accumulated a sizable estate through hard work and frugal spending. We have two grandchildren, whom we love dearly, and would like to have as beneficiaries of our estate. We are concerned that leaving them a large sum of money at an early age could pose problems insofar as we do not believe they are fiscally responsible yet and may not be able to handle such money. Is there any way that we can establish an estate plan that would protect our grandchildren from the many vices that come with exposure to large sums of money at an early age?

Answer: Yes, your concerns are quite common and are typically handled by establishing a trust for their share of your estate. While a trust sounds complicated, it is a very common estate planning tool used today for situations such as the one you have described. Your grandchildren's money would be held by a trustee. The trustee could be another member of your family or a financial institution. The trustee would oversee the expenditure of your grandchild's share until your grandchild reached the age where you felt they were fiscally responsible enough to handle the money themselves. The trustee could use this money for their health, education, support and maintenance. You could decide at what age you felt the trust should terminate, and at that point, the balance of any principal or accumulated income would go to your grandchild free of trust.

If you would like to submit a question for publication, please e-mail it to rrokisky@

Question: I have often heard people say that it is easier to protect the assets of a married couple when one spouse is in the nursing home than when a single person is in the nursing home. Could you please explain?

Answer: The law provides that the community spouse (i.e. the spouse not going into the nursing home) is able to keep half of the married couple's assets up to approximately $110,000. In addition, the assets of the institutionalized spouse (the spouse in the nursing home) and any excess assets of the community spouse can be turned into a stream of income for the community spouse in the form of a Medicaid qualifying annuity. Although the Deficit Reduction Act of 2006 made significant changes to the estate planning techniques used by elder law attorneys, the use of the Medicaid qualifying annuity is still sanctioned under the new law. There are some limitations that did not exist under the old law but it is still a very attractive alternative for a married couple, often resulting in all of their savings being protected.

Question: My parents have consistently made gifts to their children throughout their lifetime. Now my mother is going into the nursing home. Are the gifts that they have given us over the last 10 years going to cause an ineligibility period for Medicaid?

Answer: As a general rule, any transfers for which the person applying for Medicaid has not received fair market value consideration which have occurred in the last five years will cause a disqualification period for Medicaid benefits. Any gifts outside the five-year time period will not pose a problem. There is an argument that if the gifts have consistently been made as a pattern of gift giving, and have not been done for the purpose of shielding assets from long-term care, that such transfers will not constitute a disqualification period. The success of this argument will vary state by state and many times county by county. In addition, you will need to be able to produce proof of the consistent gift-giving program by your parents.

If you would like to submit a question for publication, please e-mail it to

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