By : Harvy Yee
Having a plan to organize your finances when entering into retirement is an important part of life, and choosing to utilize an income only trust is one way this can be accomplished. These agreements can assist in making you eligible to live in certain long term care facilities, and are established by a customer, spouse, or a person acting on behalf of the customer. Below are 4 characteristics that these contracts offer.
Utilizing this form of agreement protects your assets and properties from creditors and against the inability to pay for your future long term care costs. Should illness prevent you from qualifying for care insurance, a contract of this kind can give peace of mind and allow you to live out your retirement happily in whatever manner of comfort you require without fear of your belongings being collected as collateral.
Once your account is established, only income can be added, and both the money and interest accumulated are no longer counted as a resource. The finances deposited can only come from yourself, funded by resources such as your pension and must be deposited during the month they are received, or they won’t count as eligible. Although you may spend a portion of your monthly funds first, only the amount that is directly placed into your account can be considered as a non-resource; the rest would be counted against you during auditing.
Finances from your account are not able to be utilized as a form of payment for taxes. That being said, your payments will be counted as health and medical deductions, which should prevent you from having to pay in at all. In the event that you do have to pay taxes on these funds, a refund should be issued later, but contacting a professional in these matters can greatly reduce risk in this area.
Protection like this makes you able to transfer assets directly into custody of the account rather than to your adult children to whom you may later bequeath certain items. This allows your estate to be viewed as secure; where otherwise it may be seen as a gift and counted among your resources. If houses are involved in this type of transaction, there are clauses written so that you can live on in your family home or receive income from the property if it is rented, which guarantees you a level of independence.
For more information with income only trust, please visit us on our website Senior Planning.