Free Trust Forms

A client recently asked me to review a trust form she was considering using, which was a form she obtained for free from the internet. Her objective was to set property aside in the trust so the assets would be protected and she could get Medicaid to pay her care costs should she ever require long term care in a nursing home.

I discourage people who are not lawyers from using legal documents that they obtain from the internet. Doing so could result in serious problems.

The trust my client obtained from the internet, dubbed a “Maryland Irrevocable Trust,” was defective in a number of ways. While some of the provisions of the trust would not necessarily be problematic, those same provisions could cause problems depending on the client’s objectives and the intended purpose of the trust. A lawyer who is skilled in the area of estate and trust law, and in this case, Medicaid law, is able to craft a trust that would meet the client’s objectives, and in doing so, would not include certain trust provision that might be acceptable in other circumstances.

For example, in my client’s case, the trust form contained a provision that instructed the Trustee to add any income that was not distributed to the beneficiary in a particular year to the principal of the trust. While this type of clause often is used by lawyers who prepare trusts, in light of my client’s objectives, such clause could be problematic. Every time income is not distributed in a particular year and added to the principal of the trust, such action will be treated as a gift for Medicaid eligibility purposes which causes a period of Medicaid ineligibility thereby defeating the purpose of the trust.

Another problem with the trust form my client wanted to use is that the trust did not give the trustee the authority to distribute principal to the beneficiary thereby locking the funds away so they would never be available to my client during her lifetime. Because my client was planning to put all of her assets into this trust, she may have found herself in dire straits were she to encounter a situation in which she needed to use more than just her income during her lifetime. While it is possible to create a trust that meets the client’s objectives without locking away the majority of the client’s assets, the trust form my client wanted to use was not sufficient for such purpose.

The trust form also prohibited beneficiaries from serving as trustees. However, my client wanted her children, who would be future beneficiaries, to serve as the trustees, and in fact named one of her adult children as the trustee. Setting up the trust in that manner might put the trust at risk of being deemed not to be effective for my client’s intended purpose at some future time should she ever apply for Medicaid benefits expecting the trust to be in force to protect her assets. Indeed, such fact may have made the trust defective from day one so that the property would be treated as not having been held in trust in the first place.

In addition, while the trust stated that, after the client’s death, the trust assets would be distributed to her children, the trust was silent as to the disposition of the assets should one of her children die before she does. Would all of the property go to her surviving child? Or would her deceased child’s descendant take her deceased child’s share? This type of uncertainty could cause serious family problems in the future.

There were other problems with the trust form as well. One paragraph simply did not make sense. While I, as a lawyer, could come up with a reasonable interpretation of such language, it is possible that the paragraph could be misconstrued.

Also, the signature page of the trust had spaces for the creator of the trust to sign and spaces for each of the trustees to sign, but there was only one notary jurat, the space on the form in which the notary acknowledges that the person signed the document. It was unclear whose signature of the three persons who signed the document the Notary Public was to certify.

This case is but one example of several in which clients have come to me with legal documents they obtained from the internet, which documents were more of a problem than a solution to meet the client’s needs. Because of this, I warn clients to resist the siren’s song of free legal forms available on the internet. Often those forms create more problems than they solve.

The Gatesman Law Office offers economical solutions, including legal documents appropriate to the circumstances, to meet our client’s needs. Please contact us at 301-260-0095 to learn more.