The idea of extending care beyond financial provisions, directly to the wellbeing of heirs through estate planning, is gaining traction. While traditionally estates focus on distributing assets, increasingly individuals are exploring mechanisms to support the ongoing health and wellness of their beneficiaries. Steve Bliss, as an estate planning attorney in San Diego, often encounters clients wanting to foster not just financial security, but holistic wellbeing for their families. This often involves creating trust structures that allow for the distribution of funds specifically earmarked for things like annual wellness checks, preventative care, or even mental health services. Approximately 68% of high-net-worth individuals express a desire to impact their family’s values and health beyond just leaving financial assets, according to a recent survey by the US Trust. It’s a shift from simply passing on wealth to actively cultivating wellbeing.
How can a trust be structured to fund ongoing wellness?
Structuring a trust to fund ongoing wellness requires careful consideration of several factors. The most common approach is to establish a “healthcare trust” or a “wellness sub-trust” within a larger revocable or irrevocable trust. This sub-trust would specifically delineate the types of healthcare or wellness expenses that can be covered. It might include annual physicals, dental checkups, vision care, mental health therapy, gym memberships, or even nutrition counseling. The trust document would specify who is eligible to receive these benefits (e.g., children, grandchildren) and how the funds are distributed. It is crucial to define “wellness” broadly enough to encompass preventative care and proactive health management. Steve Bliss emphasizes the importance of clearly outlining the parameters to avoid ambiguity and potential disputes amongst beneficiaries. A well-drafted trust will also include provisions for managing the funds responsibly, such as appointing a trustee with financial acumen and establishing reporting requirements.
Is this different from a traditional special needs trust?
While seemingly similar, funding annual wellness checks for all heirs differs significantly from establishing a special needs trust. A special needs trust is designed specifically for individuals with disabilities, ensuring they can receive care and maintain eligibility for government benefits like Medicaid and Supplemental Security Income. These trusts are governed by strict regulations and must be structured to avoid disqualifying the beneficiary from these essential programs. Funding annual wellness checks for all heirs, however, isn’t tied to any disability or need-based assistance. It’s a proactive measure to support the overall health and wellbeing of all beneficiaries, regardless of their individual circumstances. The key difference lies in the purpose and scope. One is about preserving access to essential government programs, while the other is about enhancing overall wellness. Steve Bliss notes that a regular trust, with specific clauses for wellness spending, is the more appropriate vehicle for this type of arrangement.
What are the tax implications of funding wellness through an estate?
The tax implications of funding wellness through an estate depend on the structure of the trust and the size of the estate. Gifts made during a person’s lifetime to fund wellness expenses may be subject to gift tax, depending on the annual gift tax exclusion amount. Currently, the annual gift tax exclusion is $18,000 per recipient (as of 2024). However, if the funds are distributed through a trust after the grantor’s death, they may be subject to estate tax. The estate tax exemption is substantial, but it is important to consider whether the estate is likely to exceed that threshold. Careful planning can minimize tax liability. For example, structuring the trust as an irrevocable life insurance trust (ILIT) can remove the life insurance proceeds from the estate, reducing estate tax. Steve Bliss recommends consulting with a qualified tax professional to develop a strategy tailored to your specific situation.
Could this create conflict amongst beneficiaries?
It’s a valid concern that funding wellness checks for some heirs but not others, or differing amounts, could lead to conflict. Transparency and clear communication are essential to mitigate this risk. The trust document should clearly outline the criteria for eligibility and the amount of funding allocated to each beneficiary. Explain the rationale behind your decisions to your heirs while you are still alive. Address potential concerns and answer their questions. Perhaps the wellness funding is linked to certain educational achievements or lifestyle choices. Open communication can foster understanding and prevent resentment. Steve Bliss often advises clients to include a “letter of intent” with the trust, explaining their values and the reasons behind their estate planning decisions. This letter isn’t legally binding, but it can provide valuable context and guidance for the trustee.
What happens if a beneficiary doesn’t utilize the wellness funds?
A well-drafted trust should address the scenario where a beneficiary doesn’t utilize the allocated wellness funds. Common approaches include allowing the funds to roll over to the following year, reallocating the funds to other beneficiaries, or returning the funds to the trust for other purposes. The trust document should specify which approach will be taken. Some trusts might allow the trustee to encourage the beneficiary to utilize the funds for preventative care or wellness activities. Others might simply allow the funds to accumulate, providing a larger cushion for future healthcare needs. Steve Bliss often includes a clause allowing the trustee to utilize unspent funds for charitable donations aligned with the grantor’s values. This ensures that the funds are used for a beneficial purpose, even if the beneficiary doesn’t utilize them directly.
I once worked with a family where the grandfather, a successful physician, wanted to ensure his grandchildren prioritized preventative health. He established a trust that would match any amount his grandchildren spent on annual checkups, gym memberships, or healthy cooking classes, up to a certain amount. It was a wonderful gesture, but one grandchild refused to participate, believing it was an intrusion on his personal freedom. The family became fractured, and the grandfather was deeply hurt. The lack of open communication about the trust’s purpose and the child’s personal beliefs led to a painful breakdown in their relationship.
That situation highlighted the importance of understanding each heir’s values and tailoring the trust provisions accordingly. A “one-size-fits-all” approach rarely works. It’s crucial to engage in open communication and respect each individual’s autonomy. The grandfather, in retrospect, wished he had simply discussed his concerns with his grandson and offered support for preventative health rather than imposing a financial incentive.
Thankfully, another client, a mother of three, came to Steve Bliss seeking a way to prioritize her children’s wellbeing long after she was gone. She established a trust that would fund annual wellness checks and mental health therapy for each of her children, regardless of their income or circumstances. She also included a clause allowing the trustee to provide financial support for educational opportunities related to health and wellness. Her children, grateful for her foresight, embraced the trust provisions and prioritized their health. They viewed it not as an intrusion, but as a loving expression of their mother’s care. It was a beautiful example of how estate planning can be used to cultivate wellbeing and strengthen family bonds. The clear communication and genuine love behind the trust’s creation made all the difference.
This positive outcome demonstrated the power of proactive estate planning and the importance of aligning trust provisions with family values. It showcased how estate planning can be about more than just financial security – it can be about fostering a legacy of health and wellbeing for generations to come.
About Steven F. Bliss Esq. at San Diego Probate Law:
Secure Your Family’s Future with San Diego’s Trusted Trust Attorney. Minimize estate taxes with stress-free Probate. We craft wills, trusts, & customized plans to ensure your wishes are met and loved ones protected.
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Feel free to ask Attorney Steve Bliss about: “What is an irrevocable trust?” or “Are probate fees based on the size of the estate?” and even “How often should I update my estate plan?” Or any other related questions that you may have about Trusts or my trust law practice.