Cornerstone's Safeguard Trust

A Brief History and Explanation
of Cornerstone Estates Plans, Inc.’s SafeGuard Trust

Some of the most worrisome concerns for people over age 55 are, “What will happen to our assets/estate if one or both of us needs long term care either in our home or in a nursing home?” and second, “Will our Revocable Living Trust protect our assets/estate if long-term care is needed?”

First of all, even though your Revocable Living Trust, properly funded, will protect your heirs from the expense, time delay and public intrusion of the Probate Court, this type of trust is not a creditor proof trust. Therefore, your Revocable Living Trust will not protect your assets from having to be used to pay for your long-term care needs. Since 70% of all persons over the age of 65 will need long-term care assistance, this is a huge concern. (Please refer to page 63 of the Government’s handbook, “Medicare and You”, 2015 edition.)

Knowing this concern and wanting to offer clients better options than either having to pay out-of-pocket for the extreme expense of long-term care or having to deal with the limitations and yearly, ongoing expense of a long-term care insurance policy, Cornerstone Estate Plans began a detailed and thorough search for a better answer.

The research done by Cornerstone led to conclude that a very specifically drafted trust could be the panacea to the very real and costly threat of a long-term illness. After concluding that this specifically drafted trust would protect and preserve our clients’ assets/estate, Cornerstone then located a nationally known and published Elder Law attorney who was eminently qualified to draft such a trust. This was the birth of the SafeGuard Trust.

Having this SafeGuard Trust and titling your assets into it protects your assets from creditors. This trust also conforms to government standards and guidelines which will qualify you to receive long-term care government assistance for your in-home or nursing home long-term care needs.

The correct, legal name for this trust is a Grantor, Irrevocable, Intentionally Defective, Income-only, Spendthrift trust. Let’s look at what those words mean.

A Grantor trust is any trust into which the Grantors put their assets and are deriving benefits from the assets held within the trust. You, as the Grantor, have the right to spend and enjoy all the income from any investment held by the trust (e.g., CDs, stock dividends, etc.)

An irrevocable trust is a trust that, traditionally, cannot be revoked or changed in any way. However, due to a special provision drafted within the SafeGuard Trust, there is a way to change both who is to receive an inheritance and when they are to receive it.

In addition, the assets held within an irrevocable trust cannot be removed from the trust. You do, however, have the right to reinvest or move the trust assets around within the trust. (For example, you may sell your home, open a CD, buy a car, etc. as long as the assets stay titled to the trust.)

The SafeGuard Trust is drafted in such a way that, even though it is an irrevocable trust (which normally means that the assets within the trust are considered outside of your estate for Federal Estate Tax purposes) it contains intentionally defective language. The assets in the trust stay within your estate, which allows for a “step up” in basis upon your death. Your heirs will receive their inheritance at their value at your passing, not at the cost you paid. Therefore, your heirs will avoid having to pay capital gains taxes on any assets that they receive upon your passing.

The SafeGuard Trust is an income-only trust. This means that you are only allowed to access and spend the income from the trust and not the principal. However, you may access and spend the trust principal on trust assets. For instance, you may spend trust principal for a new roof on your home or a new car because these are assets held by the trust. However, you cannot use trust principal for anything for yourself (your food, clothing or a vacation). If, at some point, you find that you need to access trust principal in an emergency, there is a provision drafted into the SafeGuard which allows trust principal to be gifted to your heirs. Your heirs may then use the gifted principal to satisfy the emergency. This provision is called a “back door” or “rainy day” provision and takes the sting out of not being able to access trust principal directly.

The spendthrift provision is drafted to protect your heirs from creditors wanting to attach their inheritance. For instance, if your heirs go through a divorce, a bankruptcy or a law suit, their inheritance cannot be attached or taken from them. Their inheritance is safe from those “creditor” attacks and will not affect what you wish to leave them.

In conclusion, the SafeGuard Trust was specifically drafted to be in compliance with the Federal Title 19 guidelines. This means that should you choose to, you will qualify to receive government assistance for your long-term care needs whether those needs are in your home or at a skilled nursing home facility. By utilizing the SafeGuard Trust, you will be able to protect and preserve your hard-earned assets for your spouse and your children to enjoy, just as you have always planned.

Please contact Jordan Tobin at Integrated Planning Strategies for a thorough explanation of how the SafeGuard Trust will give you the “sleep-well” insurance that we all want and need. After all, it is your money, you worked hard to earn it and you should be able to count on it being there for the “Golden Years”. You shouldn’t have to worry about losing your hard-earned assets to the devastation and expense of a long-term illness.