Can I specify that certain assets be used only for health-related costs?

Estate planning allows for incredible customization, and yes, you absolutely can specify that certain assets be used only for health-related costs, even long after your passing. This is often achieved through carefully crafted trust provisions or specific bequests within a will. The key is precise language and a clear understanding of how these instructions will be carried out by your trustee or executor. Approximately 68% of Americans haven’t created a will or trust, meaning a significant portion of their wishes regarding asset distribution, especially concerning specific needs like healthcare, may go unfulfilled. This highlights the importance of proactive estate planning.

What Happens If I Don’t Plan for Future Healthcare Costs?

Without a designated plan, assets are distributed according to state law (intestate succession) or the terms of your will or trust, which may not prioritize healthcare needs. This can leave beneficiaries struggling to cover unexpected medical expenses or long-term care costs. Furthermore, distributed assets may be subject to creditors or misused, diminishing their ability to provide for intended health-related purposes. A well-structured estate plan, however, allows you to create a dedicated fund or specify that certain accounts be reserved for future healthcare expenses, providing financial security for your loved ones. Many individuals underestimate the rising costs of healthcare, making proactive planning crucial. For example, the average cost of long-term care can easily exceed $90,000 per year, a burden many families are unprepared for.

How Can a Trust Help Me Cover Future Healthcare Expenses?

A trust is a powerful tool for specifying how assets should be used, even after your death. You can create a “healthcare trust” or include specific provisions within an existing trust, outlining that certain funds are to be used exclusively for medical expenses, insurance premiums, or long-term care costs for designated beneficiaries. The trustee is legally obligated to follow these instructions, ensuring that the funds are used as intended. The California Prudent Investor Act guides the trustee in responsibly managing these investments to generate sufficient income to cover anticipated healthcare costs. Trusts offer greater control and flexibility compared to simple will bequests, allowing for ongoing management and adaptation to changing healthcare needs. California law allows for the creation of special needs trusts, which can provide for individuals with disabilities without jeopardizing their eligibility for government benefits.

What About Using a Will to Specify Healthcare Funds?

While a will can certainly direct that certain assets be used for healthcare, it’s generally less effective than a trust. A will only takes effect after your death and requires probate, a court-supervised process that can be time-consuming and expensive. In California, formal probate is required for estates over $184,500, and statutory fees for executors and attorneys can significantly reduce the value of the estate. Furthermore, a will provides less control over how the funds are used after distribution. Once assets are distributed, the beneficiaries are free to use them as they wish. A trust, however, allows you to maintain control over the funds and ensure they are used for their intended purpose. Approximately 40% of Americans die without a will, leaving their assets subject to state intestacy laws and potentially causing significant hardship for their loved ones.

What if My Beneficiary’s Health Needs Change?

Estate planning isn’t a one-time event; it requires periodic review and updates to reflect changing circumstances. You can include provisions in your trust or will that allow for flexibility in addressing future healthcare needs. For example, you can grant the trustee discretion to modify the distribution schedule or use the funds for unforeseen medical expenses. It’s crucial to revisit your estate plan every few years, or whenever there’s a significant life event, such as a marriage, divorce, birth of a child, or change in health status. Remember that all assets acquired during a marriage are considered community property, owned 50/50, and the surviving spouse benefits from a “double step-up” in basis for tax purposes. Proper planning can also help minimize estate taxes and ensure that your assets are protected from creditors.

Steven F. Bliss ESQ. can help you navigate the complexities of estate planning and create a customized plan that meets your specific needs and goals.
Call (951) 363-4949 today for a consultation.

Don’t leave the future of your loved ones to chance – plan today for a secure tomorrow.