A trust is a document used in estate planning. A trust is a written legal agreement between the individual who creates the trust (called the grantor, settlor, or creator) and a trustee, the person or institution who is named to manage the trust assets.
The trustee holds legal title to the assets for the benefit of one or more trust beneficiaries. The ideal trustee has personal knowledge of the grantor and investment expertise. A trustee team — composed of an individual trustee who knows the grantor well and an institutional trustee with investment knowledge — is a workable solution for some people.
There are different types of trusts. The basic categories include:
- A revocable living trust is one that can be changed or cancelled at any time.
- An irrevocable living trust cannot be changed.
- A testamentary trust is one that is irrevocable upon the person’s death.
Within these basic categories are a number of types of trusts. Two that may be of interest to families who have a service member/veteran with TBI are:
- A “special needs” trust is one that is created by a parent or other family member of a person with a disability who is the beneficiary of the trust. This can be either a living trust or a testamentary trust. The trust may hold cash, personal property, or real property, or can be the beneficiary of life insurance proceeds. The disabled person cannot have any control over these assets.
- A Qualified Income Trust (“Miller Trust”) is used in states where there is a limit on the amount of income allowed for Medicaid nursing home eligibility. Some nursing home residents may have retirement incomes at or above the level that disqualifies them for Medicaid, yet do not have enough money to privately pay for a nursing home. Section 1396p of Title 42 of the United States Code permits the creation of an income diversion trust that allows pension, Social Security, and other income to be placed in an irrevocable trust. Upon the death of the beneficiary, the state receives all amounts remaining in the trust equal to the total medical assistance paid by Medicaid on behalf of the beneficiary.