New Ways to Plan for Long-Term Care Costs: Self-Insure & Medicaid Trusts

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

Planning for long-term care has always been one of the most challenging aspects of a retirement plan. For decades, the go-to solution was purchasing long-term care insurance. But as we move into 2025, this option is becoming less viable for many families due to skyrocketing premiums and shrinking availability associated with long-term care insurance. For example, in New York, there is now only one insurance company still offering new long-term care insurance policies. Carriers are exiting the market because the probability of policies paying out is high, and the dollar amounts associated with these claims can easily be in excess of $100,000 per year.

So where does that leave retirees and their families? Fortunately, there are two primary strategies that have emerged as alternatives:

• Self-insuring by setting aside a dedicated pool of assets for potential care.

• Using Irrevocable or Medicaid trusts to protect assets and plan for Medicaid eligibility.

In this article, we’ll break down each approach, their pros and cons, and what you should consider when deciding which path makes sense for you.

The Self-Insurance Strategy

Self-insuring means you create a separate “bucket” of assets earmarked specifically for long-term care needs. Instead of paying tens or even hundreds of thousands of dollars in premiums over the years for the long-term insurance coverage, those funds stay in your name. If a long-term care event never occurs, those assets simply pass on to your beneficiaries.

The benefits:

• Flexibility—you decide how, when, and where care is provided.

• Assets remain under your control and stay in your estate.

• Avoid the risk of paying for insurance you never use.

The challenges:

• You need significant extra assets, beyond what you already need to meet your retirement income goals.

• Costs can be substantial—long-term care can run $120,000 to $200,000 per year, depending on location and type of care.

Self-insuring works best for those who have enough wealth to comfortably dedicate a portion of their portfolio to this potential risk without jeopardizing their retirement lifestyle.

The Trust Approach

For individuals or couples without the level of assets needed to fully self-insure, the next common strategy is using Irrevocable trusts (often called Medicaid trusts). These trusts are designed to protect non-retirement assets so that if you need long-term care in the future, you may qualify for Medicaid without having to spend down all your savings.

How it works:

• Assets placed into an irrevocable trust are no longer counted as yours for Medicaid eligibility purposes.

• If structured properly and far enough in advance, this can preserve assets for heirs while ensuring that Medicaid can help cover long-term care.

Important considerations:

• There is typically a five-year look-back period in most states. If assets aren’t in the trust at least five years before applying for Medicaid, the strategy can fail.

• Medicaid doesn’t cover everything. For example, around-the-clock home health care often isn’t fully covered, which limits flexibility.

The trust strategy is most effective for individuals who wish to protect their assets but recognize that care options may be limited to facilities and providers that accept Medicaid.

Which Approach is Right for You?

Ultimately, the choice between self-insuring and using a trust comes down to your financial position and your preferences for future care.

• If you value flexibility and have the assets, self-insuring is often the preferred option.

• If resources are more limited, a trust strategy can provide asset protection and access to Medicaid, even though it may reduce your care options.

The Key Takeaway: Plan Ahead

Whether you choose to self-insure, set up a trust, or use a combination of both, the most important factor is timing. These strategies require proactive planning—often years in advance. With costs continuing to rise and traditional long-term care insurance becoming less accessible, exploring these new approaches early can help protect both your assets and your peace of mind.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs)

Why is traditional long-term care insurance becoming less viable?
Long-term care insurance has become less practical due to rising premiums, stricter underwriting, and fewer insurers offering new policies. Many carriers have exited the market because claim payouts are large and frequent, making policies increasingly expensive for consumers.

What does it mean to self-insure for long-term care?
Self-insuring means setting aside a dedicated portion of your assets to cover potential long-term care expenses instead of paying insurance premiums. This approach offers flexibility and keeps assets under your control but requires sufficient wealth to handle potentially high annual costs.

Who is best suited for a self-insurance strategy?
Self-insuring typically works best for individuals or couples with substantial savings beyond what’s needed for retirement income. Those with enough assets can earmark funds for potential care without endangering their financial security or lifestyle.

What is a Medicaid or irrevocable trust, and how does it help with long-term care planning?
An irrevocable or Medicaid trust allows individuals to transfer assets out of their name, potentially helping them qualify for Medicaid coverage without depleting all their savings. If created properly and early enough, it can preserve wealth for heirs while enabling access to Medicaid-funded care.

What are the limitations of using a trust for long-term care planning?
Medicaid trusts must be established at least five years before applying for benefits to meet look-back rules. Additionally, Medicaid may not cover all types of care, such as full-time home assistance, which can limit personal choice and flexibility.

When should you start planning for long-term care needs?
It’s best to plan well in advance—ideally several years before care is needed. Early planning allows time to build assets for self-insuring or to structure a trust properly for Medicaid eligibility, reducing financial and emotional stress later.

What Happens If You Die Without a Will?

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

No one likes to think about their own death, but estate planning is one of the most important financial steps you can take to protect your family and loved ones. One of the simplest — yet most critical — estate planning tools is a will.

Unfortunately, many people pass away without one. According to surveys, more than half of Americans don’t have a will in place. But what really happens if you die without a will?

• State laws decide who gets your assets — not you.

• The probate process becomes longer, more expensive, and more stressful for your family.

• Guardians for minor children are chosen by a judge, not by you.

• Children can inherit large sums at age 18 with no safeguards, which can sometimes hurt more than help.

• Simple solutions exist — a basic will can often be set up for a minimal cost.

Let’s walk through what happens if you don’t have a will, why that can create complications, and what you can do to avoid these pitfalls.

State Laws Take Over

If you die without a will, you die “intestate.” This means your estate will be distributed according to your state’s intestacy laws. These laws vary by state, but most follow a general pattern:

• If you’re married, your assets may be split between your spouse and children.

• If you’re single with children, everything generally goes to your kids in equal shares.

• If you have no spouse or children, assets may pass to your parents, siblings, nieces, nephews, or more distant relatives.

The problem? State law or a judge, who doesn’t know you or your family dynamics will decide how your estate is distributed. You lose the ability to decide who receives what, when they receive it, or under what conditions.

A Longer, More Expensive Probate Process

With a valid will, your executor follows your instructions and distributes assets relatively quickly. Without a will, the court must:

1. Appoint an executor (which may take time and spark disagreements).

2. Require appraisals of property, attorney involvement, and court oversight.

3. Follow state intestacy laws to distribute assets.

This makes the probate process longer, more complicated, and often more expensive. Beneficiaries can wait months — even years — before assets are fully distributed.

For families already grieving a loss, this added complexity can be emotionally draining.

The Stakes Are Higher With Minor Children

If you have children under 18, the consequences of dying without a will become even more serious.

• Guardianship: A judge will appoint a guardian for your children, without knowing who you would have chosen.

• Inheritance access: At age 18, children may receive their full inheritance outright.

That means a teenager could suddenly inherit hundreds of thousands of dollars from life insurance, retirement accounts, or the sale of your home. Without safeguards in place, that money may not be used wisely and could dramatically affect your child’s life path.

A properly drafted will (or even better, a trust) can set rules, such as delaying inheritance until your children reach a more mature age or providing funds gradually over time.

Probate Isn’t the Only Issue

Estate planning attorneys often recommend going one step further than a will to avoid probate altogether. Common strategies include:

• Revocable living trust: Assets in a trust bypass probate and are distributed privately according to your instructions.

• Transfer on Death (TOD) accounts: Bank and brokerage accounts with TOD designations pass directly to beneficiaries without probate.

• Beneficiary designations: Retirement accounts and life insurance policies allow you to name beneficiaries directly, which supersedes a will.

These strategies not only streamline the distribution process but can also protect your family from unnecessary legal fees and court delays.

A Will Doesn’t Have to Be Expensive

One of the biggest misconceptions is that creating a will is time-consuming or costly. In reality, establishing a will can be very inexpensive:

• Online services like LegalZoom.com or Rocket Lawyer can help you set up a simple will for a minimal fee.

• While these are good starting points, we recommend working with an estate attorney if your situation is more complex — especially if you have children, significant assets, or unique wishes.

Think of a will as one of the most affordable forms of “insurance” you can buy. For a small upfront cost, you can save your family thousands of dollars, countless hours, and significant emotional stress later.

Final Thoughts

If you die without a will, the state — not you — decides how your assets are distributed and who cares for your children. The probate process becomes more costly, more time-consuming, and much more stressful for your loved ones.

The good news is that creating a will is relatively easy and inexpensive. Whether through a simple online service or a consultation with an estate attorney, taking this step ensures you stay in control and your family is protected.

At the end of the day, a will is about more than just money — it’s about peace of mind.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs)

What happens if you die without a will?
If you die without a will, your estate is distributed according to your state’s intestacy laws. This means a court decides who receives your assets and when, which can lead to outcomes you may not have intended.

How does dying without a will affect the probate process?
Without a will, the probate process is usually longer, more expensive, and more complicated. The court must appoint an executor, oversee asset distribution, and may require appraisals or attorney involvement—all of which add time and cost.

What happens to minor children if a parent dies without a will?
If you have minor children and no will, a judge will decide who becomes their guardian. In addition, any inheritance they receive becomes theirs outright at age 18, without safeguards to ensure it’s managed responsibly.

Can you avoid probate without a will?
Yes. Using tools like revocable living trusts, Transfer on Death (TOD) accounts, and beneficiary designations can help assets pass directly to heirs without going through probate. These strategies can save time and reduce legal expenses.

Is creating a will expensive or time-consuming?
Creating a basic will is typically affordable and straightforward. Online services can help for a low cost, while more complex situations may benefit from an estate attorney’s guidance.

Why is having a will so important?
A will ensures your wishes are honored, your loved ones are protected, and your estate is distributed efficiently. It also provides peace of mind knowing your family won’t face unnecessary legal or financial burdens during an already difficult time.

A Financial Checklist for Surviving Spouses

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

Losing a spouse is one of life’s most difficult experiences. During this time of grief, handling financial matters can feel overwhelming. It’s important to remember that you don’t need to do everything at once. In fact, we often advise clients not to make any major financial decisions for 6 to 12 months after the loss of a loved one, if it can be avoided.

This guide is designed to provide a gentle checklist of financial steps to consider, along with reassurance that you don’t need to navigate this alone.

Step 1: Take Care of Immediate Needs

In the first weeks, focus only on what must be handled right away:

• Ensure bills and accounts are being paid—utilities, mortgage, and insurance premiums—so nothing important lapses. If additional cash is needed to cover these expenses or funeral costs, you may want to contact your investment advisor to request a distribution from your brokerage or retirement account.

• Gather key documents such as the death certificate, Social Security card, and marriage certificate. You will need several certified copies of the death certificate.

• Notify Social Security to stop benefits if your spouse was receiving them, and inquire about survivor benefits.

• Contact your spouse’s employer (if applicable) to ask about any final pay, life insurance, or retirement benefits.

• Inventory assets and debts: Create a list of accounts, loans, credit cards, and other financial items.

At this stage, just focus on stabilization. Bigger decisions can wait.

Step 2: Meet With Your Estate Attorney

An estate attorney can be one of the most important resources for a surviving spouse. They will help guide you through the legal aspects of settling your spouse’s estate and make sure everything is handled properly. Some of the areas they may assist with include:

• Reviewing your spouse’s will or trust to ensure assets are distributed according to their wishes.

• Probate guidance if the estate needs to go through the court process.

• Updating property titles and deeds (such as the home, vehicles, or other jointly owned assets).

• Retitling accounts that were in your spouse’s name alone.

• Confirming beneficiary designations on retirement accounts, life insurance, and other policies.

• Handling debts and obligations—making sure outstanding bills or loans are addressed properly.

• Advising on estate tax issues and helping file any required estate or inheritance tax returns.

• Updating your own estate plan to reflect changes in beneficiaries, powers of attorney, and trusts.

Meeting with an estate attorney early ensures that the legal and financial transition is handled with care, giving you peace of mind during a difficult time.

Step 3: Understand Insurance and Benefits

• Life insurance: If your spouse had life insurance, begin the claims process. Take your time deciding how to use any proceeds.

• Employer benefits: You may be eligible for continued health coverage, pension payments, or survivor retirement benefits.

• Government benefits: Social Security survivor benefits may be available, depending on age and circumstances.

Step 4: Review Bank and Investment Accounts

After the first three steps, begin to look at household finances more closely.

• Confirm joint accounts: In many cases, joint bank accounts automatically transfer to the surviving spouse.

• Update beneficiary designations: Retirement accounts, life insurance, and transfer-on-death accounts should be reviewed.

• Check for automatic payments: Make sure you know which accounts are connected to bills or subscriptions.

• Begin retitling accounts per the direction of your estate attorney or investment advisor.

This helps establish a clear picture of where things stand.

Step 5: Avoid Major Financial Decisions for 6–12 Months

Grief can cloud judgment. If possible, hold off on large changes such as:

• Selling the family home

• Making major investment decisions

• Gifting or lending large sums of money

Instead, focus on maintaining stability and keeping everything in order until you feel emotionally and financially ready.

Step 6: Seek Guidance from Financial Professionals

You don’t need to carry this burden alone. Financial professionals can provide both guidance and peace of mind:

• Accountants can help navigate tax considerations, including filing final returns for your spouse.

• Financial planners can help you prioritize needs and create a roadmap for the months and years ahead.

• Investment advisors can review your portfolio and suggest adjustments to fit your new circumstances.

Having trusted professionals at your side means you don’t have to make every decision yourself. They can help simplify the process and give you confidence that nothing is being overlooked.

Step 7: Begin Planning for the Future—When You’re Ready

When you feel ready, start thinking about the long-term picture:

• Update your own will, trust, and estate plan.

• Revisit beneficiaries on accounts and insurance policies.

• Adjust your budget and income sources for your new household situation.

• Consider whether your investment and retirement plans need rebalancing.

Take these steps one at a time, at a pace that feels manageable.

Final Thoughts

The loss of a spouse is deeply personal, and the financial responsibilities that follow can feel heavy. Remember: you do not need to have all the answers right away, and you don’t need to do this alone.

By leaning on a checklist like this—and enlisting the support of accountants, planners, and advisors—you can move forward step by step. Over time, clarity will return, and you’ll feel more confident about the financial decisions that lie ahead.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs)

What financial steps should I take immediately after losing a spouse?
Focus first on essential needs—keeping bills current, gathering key documents, and notifying Social Security and your spouse’s employer. Avoid making major financial changes right away; the priority is maintaining stability during the initial weeks.

Why is meeting with an estate attorney so important after a spouse’s death?
An estate attorney helps ensure your spouse’s will, trusts, and beneficiary designations are properly executed. They can guide you through probate, retitle assets, settle debts, and help update your own estate plan to reflect your new situation.

What types of benefits should a surviving spouse review?
Survivors should check for life insurance proceeds, employer benefits such as pensions or continued health coverage, and Social Security survivor benefits. Each of these may provide valuable financial support during the transition.

When should I start making major financial decisions after a loss?
It’s best to wait six to twelve months before making large financial moves, such as selling property or changing investments. This allows time for emotions to settle and for you to make decisions with clarity.

How can financial professionals help after the loss of a spouse?
Accountants can manage tax filings and estate issues, while financial planners and investment advisors can help organize accounts, adjust your financial plan, and guide long-term decisions with care and objectivity.

What long-term financial updates should I make as a surviving spouse?
When ready, update your own will, trust, and beneficiary designations. Review your budget, income sources, and investment strategy to ensure they align with your new circumstances and future goals.

Understanding Per Stirpes Beneficiary Designations

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

When you fill out a beneficiary form for a retirement account, life insurance policy, or investment account, you may come across the term “per stirpes.” It’s a Latin phrase, but don’t let that intimidate you. Choosing per stirpes for your beneficiaries simply determines what happens if one of your named beneficiaries passes away before you do.

In this article, we’ll cover:

• What per stirpes means and how it works

• A simple comparison of per stirpes vs. non–per stirpes designations

• Why keeping beneficiaries up to date is so important

• Special considerations when children or minors are involved

What Does Per Stirpes Mean?

Per stirpes means “by branch” or “by the bloodline.” With this designation, if one of your named beneficiaries passes away before you, their share of the inheritance automatically passes down to their descendants.

If you don’t select per stirpes, your beneficiary designation is considered non–per stirpes, which means that if a beneficiary predeceases you, their share is generally redistributed among the remaining named beneficiaries.

Example: 50/50 Beneficiaries

Let’s walk through a clear example.

Case 1: Non–Per Stirpes (default in many plans)

• You name your two children, Anna and Ben, as 50/50 beneficiaries.

• Anna passes away before you.

• Result: Ben inherits 100% of the account. Anna’s children (your grandchildren) do not receive anything unless you’ve updated the beneficiary form to include them.

Case 2: Per Stirpes

• You name your two children, Anna and Ben, as 50/50 beneficiaries per stirpes.

• Anna passes away before you, leaving two children of her own.

• Result: Ben still receives his 50% share. Anna’s 50% share is split evenly between her two children (25% each).

This is why per stirpes is often called a “fail-safe” designation—it ensures the inheritance follows the family line if a beneficiary dies before you.

Why Keeping Beneficiaries Updated Matters

While per stirpes can act as a backup plan, the best approach is to keep your beneficiary designations current.

• If a beneficiary passes away, you can always file a new form naming updated beneficiaries.

• If you update promptly, the per stirpes designation never even comes into play.

• Regular reviews—especially after major life events like births, deaths, or divorces—can help ensure your assets go exactly where you intend.

Special Considerations for Minors

Per stirpes can create complications if the next in line are minor children. For example, if Anna’s 50% share passes to her 10-year-old child, that minor generally cannot inherit assets outright. Instead, the guardian of the child may have to serve as a custodian to the account until the child reaches the age of majority. However, when the child reaches the age of majority, they gain full control over their inheritance, which may or may not be beneficial.

This raises an important planning question:

• Do you want minor children to inherit directly?

• Or would it make more sense to create a trust and name the trust as the beneficiary?

Working with an estate planning attorney can help clarify the best approach for your family.

Key Takeaways

• Per stirpes means a beneficiary’s share passes down to their descendants if they predecease the account owner.

• Non–per stirpes means a predeceased beneficiary’s share is typically divided among the remaining beneficiaries.

• Keeping beneficiary forms up to date reduces the need to rely on per stirpes.

• If potential per stirpes beneficiaries are minors, additional planning (like a trust) may be necessary.

Beneficiary designations are powerful estate planning tools. A quick review of your forms can make all the difference in ensuring your assets are passed down according to your wishes—without leaving things to chance.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs)

What does “per stirpes” mean on a beneficiary form?
“Per stirpes” is a Latin term meaning “by branch” or “by bloodline.” It ensures that if a named beneficiary passes away before you, their share automatically goes to their descendants, such as their children or grandchildren.

How does per stirpes differ from non–per stirpes?
With a per stirpes designation, a deceased beneficiary’s share passes down to their heirs. In contrast, a non–per stirpes designation redistributes that share among the remaining living beneficiaries, bypassing the deceased beneficiary’s family line.

Why should I keep my beneficiary designations up to date?
Life events such as marriages, births, deaths, or divorces can change your intentions for who should inherit your assets. Regularly updating your forms ensures your accounts are distributed according to your current wishes rather than relying on default rules or outdated designations.

What happens if a per stirpes beneficiary is a minor?
Minors typically cannot inherit assets outright, so a custodian or guardian may need to manage the funds until the child reaches adulthood. Some families use trusts to control when and how minors receive their inheritance.

When should I consider naming a trust instead of individuals as beneficiaries?
If you want more control over how and when heirs—especially minors—receive their inheritance, naming a trust as the beneficiary can help. A trust allows you to set specific rules for distributions and avoid complications with guardianship or early access to funds.

Is per stirpes the best option for everyone?
Not necessarily. While per stirpes ensures assets follow the family line, some people prefer equal redistribution among surviving beneficiaries. The best choice depends on your family structure, estate goals, and how you want your assets to be passed down.

Trust Roles Easily Explained: Grantor, Trustee, and Beneficiary

When it comes to estate planning, trusts can be powerful tools—but they’re only as effective as the people involved. Whether you’re creating a trust or have been named in one, you need to understand three key roles: grantor, trustee, and beneficiary.

Here’s how each role works, how they relate to one another, and what to watch out for.

The Three Key Roles in a Trust

1. Grantor (also called Settlor)

The grantor is the person who creates the trust and decides what goes into it and how it should be managed.

What the Grantor Does:

• Creates and funds the trust

• Sets the rules for how assets will be distributed

• Names the trustee and beneficiaries

• Can often serve as a trustee in a revocable trust

Example:
Sarah creates a revocable living trust and transfers her home and investment account into it. She sets terms for how her assets should pass to her children. Sarah is the grantor.

2. Trustee

The trustee is the person or institution responsible for managing the trust and following the rules set by the grantor.

Trustee Responsibilities:

• Manage and safeguard trust assets

• Follow the trust document’s instructions

• Distribute funds to beneficiaries

• Maintain records, file taxes, and act as a fiduciary

Example:
Sarah establishes an Irrevocable Trust and names her sister Emily as trustee. The trustee is awarded specific powers over the trust assets, such as establishing an investment account for the trust, selling real estate, making gifts to beneficiaries, hiring an accountant to prepare the tax return for the trust, and eventually distributing the assets accordingly. Emily is the trustee.

3. Beneficiary

The beneficiary is the person (or group) who receives the benefit of the trust, either now or in the future.

Beneficiaries Typically:

• Receive income or assets according to the trust terms

• Do not control how the trust is managed

Example:
Sarah’s children, Ava and Ben, are listed as beneficiaries. The trust states they’ll receive assets at age 30 but the trustee is allowed to distribute money from the trust to Ava and Ben to provide financial support for education, health, shelter, and living expenses. Ava and Ben are the beneficiaries.

Can One Person Fill Multiple Roles?

Yes. In many revocable trusts, the grantor can also be the trustee and beneficiary while alive. However, they must name a successor trustee to step in when needed.

In irrevocable trusts, the grantor typically gives up control and cannot serve as trustee or beneficiary.

For trusts that name someone beside the grantor as a trustee, it’s common that the trustee may also be a beneficiary of the trust. 

Example:
Sarah establishes an Irrevocable Trust and names her daughter, Ava, as Trustee. Ava is also a beneficiary of the trust with her brother Ben.

Why These Roles Matter

Choosing the wrong person or failing to clearly define roles can lead to:

• Disputes among family members

• Over-providing or under-providing powers to the trustee

• Mismanagement of assets

• Delays in distribution or tax problems

Planning Tips

• Review your trust documents and confirm who’s named in each role

• Confirm all of the powers you have provided to the trustee

• Name backup (successor) trustees in case your primary can’t serve

• Pick a trustee who is reliable, impartial, and financially competent

• Make sure your beneficiaries are clearly defined and up to date

Common Mistakes to Avoid

• Naming a trustee who lacks the time or skills to manage finances

• Forgetting to update your trust after a major life event (death, divorce, birth)

• Assuming your trustee can make decisions outside the written terms (they can't)

• Not reviewing your trust with your attorney after major tax law changes

Final Thought

Trusts only work when the right people are in the right roles—with a clear roadmap to follow. If you haven’t reviewed your trust recently, now is a great time.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What is a grantor in a trust?
The grantor (also called the settlor) is the person who creates and funds the trust. They decide what assets go into it, set the distribution rules, and name the trustee and beneficiaries. In many revocable trusts, the grantor may also serve as the trustee during their lifetime.

What does a trustee do?
The trustee manages the trust’s assets according to the grantor’s instructions. Responsibilities include safeguarding property, making distributions to beneficiaries, maintaining records, filing taxes, and acting in the best interests of the beneficiaries. The trustee must follow the trust document exactly as written.

Who are the beneficiaries of a trust?
Beneficiaries are the individuals or organizations who receive the benefits of the trust, either through income distributions, asset transfers, or both. They do not control how the trust is managed unless specifically granted that authority.

Can one person serve as grantor, trustee, and beneficiary?
Yes, in many revocable living trusts, one person can fill all three roles. However, for irrevocable trusts, the grantor typically gives up control and cannot act as trustee or beneficiary. In some cases, a trustee may also be a beneficiary if allowed by the trust terms.

What happens if the trustee is also a beneficiary?
It’s common for a trustee to also be a beneficiary, especially in family trusts. However, this arrangement can create conflicts of interest, so the trust should clearly define limits on the trustee’s powers to ensure fair treatment of all beneficiaries.

Why is choosing the right trustee important?
The trustee controls how and when trust assets are managed and distributed. Selecting someone unreliable or inexperienced can lead to mismanagement, family disputes, or tax problems. A trustee should be financially responsible, impartial, and able to follow complex legal instructions.

Can a trust have more than one trustee?
Yes. Co-trustees can share responsibilities, which can help balance workload and oversight. However, having multiple trustees can also slow decision-making, so coordination and clear communication are essential.

What is a successor trustee?
A successor trustee is a backup who steps in if the primary trustee is unable or unwilling to serve. Naming one (or more) successor trustees ensures that the trust continues to operate smoothly without court involvement.

What are common mistakes people make when setting up a trust?
Frequent mistakes include naming an unqualified trustee, failing to update the trust after major life changes, misunderstanding the trustee’s authority, and neglecting to review the trust after tax law updates.

Why is it important to review your trust regularly?
Laws, family circumstances, and financial situations change over time. Reviewing your trust every few years—or after major events like marriage, divorce, or the birth of a child—ensures that your intentions remain clear and your plan stays effective.

Should You Put Your House in a Trust or Gift It?

For many families, the home is one of the most valuable assets they’ll pass on to the next generation. But when it comes to estate planning, simply deciding who gets the house isn’t enough. How you transfer the home, either by placing it in a trust or gifting it during your lifetime, can have significant tax and legal implications.

In this article, we’ll break down the pros and cons of each option so you can make a more informed decision.

Option 1: Putting Your Home in a Trust

A revocable living trust is one of the most common tools used in estate planning to manage the transfer of assets after death—your home included.

Benefits of Using a Revocable Trust

• Avoids Probate: When a home is placed in a trust, it can pass directly to your heirs without going through the probate process, which can be lengthy and public.

• Maintains Control: With a revocable trust, you still own and control the property during your lifetime. You can sell it, live in it, or remove it from the trust at any time.

• Clear Instructions: You can specify exactly how and when the property should transfer, including naming successor trustees to manage it if you become incapacitated.

• Step-Up in Cost Basis: Heirs who receive a home through a trust at your death typically receive a step-up in basis, meaning capital gains taxes are calculated based on the home’s value at your date of death—not what you originally paid.

Potential Drawbacks

• Setup Costs: Establishing a trust requires legal work and upfront costs.

• Ongoing Maintenance: You’ll need to update the trust if your wishes change and ensure the title of the home is properly retitled into the trust.

• Long-Term Care Risk: Unlike an Irrevocable Trust, a Revocable Trust is not protected from a Medicaid spenddown associated with a long-term care event.

To learn more about if you should put your house in a trust, watch our video here.

Option 2: Gifting the Home During Your Lifetime

Some individuals consider transferring ownership of their home to their children or heirs while they’re still alive. This might feel like a generous or efficient move—but it can come with unintended consequences.

When Gifting May Be Appropriate

• If you’re planning ahead for Medicaid eligibility and want to remove assets from your estate (with timing and rules carefully considered)

• If the home has minimal appreciation and capital gains aren’t a major concern

Risks of Gifting the Home

• Loss of Control: Once you gift the property, you no longer own it. You can’t sell it or use it as collateral without the new owner’s permission.

• No Step-Up in Basis: The recipient inherits your original cost basis. If the home has appreciated significantly, they may face large capital gains taxes when they sell it.

• Medicaid Look-Back Period: Gifting a home may disqualify you from Medicaid benefits if done within five years of applying, depending on your state’s rules.

• Possible Gift Tax Reporting: While you may not owe gift tax, you must file a gift tax return if the gift exceeds the annual exclusion limit ($19,000 per person in 2025).

To learn more about gifting your house to your children, watch our video here.

Which Option Is Better?

In most cases, placing your home in a trust provides more flexibility, tax efficiency, and control over how the asset is handled both during your life and after your death. It’s especially helpful if you want to:

• Avoid probate

• Maintain access and control

• Ensure a step-up in basis for your heirs

• Provide clear transfer instructions

Gifting, on the other hand, might make sense in very specific planning scenarios—but it carries more risk and fewer tax advantages if not done carefully.

Final Thoughts

Your home is more than just a valuable asset. It’s also tied to your financial security and your family’s future. Whether you decide to put it in a trust or gift it, the key is aligning the decision with your broader estate, tax, and long-term care planning goals.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What are the benefits of putting your home in a trust?
Placing your home in a revocable living trust helps it transfer to heirs without probate, maintaining privacy and avoiding court delays. It also allows you to retain control of the property during your lifetime and ensures your heirs receive a step-up in cost basis, reducing potential capital gains taxes when they sell the home.

What are the drawbacks of using a revocable trust for your home?
Setting up a trust requires legal documentation and some upfront cost, and the trust must be maintained over time to reflect your wishes. Additionally, assets in a revocable trust are not protected from Medicaid spend-down rules in the event of long-term care needs.

What happens if I gift my home to my children while I’m alive?
When you gift your home during your lifetime, ownership transfers immediately, meaning you lose control over the property. The recipient inherits your original cost basis, which could lead to higher capital gains taxes if they sell the home in the future.

Are there tax implications when gifting a home?
Yes. While you may not owe gift tax immediately, you must file a gift tax return if the gift exceeds the annual exclusion amount ($19,000 per person in 2025). The recipient also does not receive a step-up in cost basis, which can increase future taxable gains.

How does gifting a home affect Medicaid eligibility?
Gifting a home within five years of applying for Medicaid can trigger penalties or delay eligibility. The transfer may be counted under Medicaid’s “look-back” period, so timing and state-specific rules are important to consider.

Is it better to gift my home or put it in a trust?
For most people, placing the home in a revocable trust offers more flexibility, control, and tax efficiency. Gifting may make sense only in specific situations, such as Medicaid planning, and should be done with professional guidance to avoid costly mistakes. When it comes to Medicaid planning, often setting up an Irrevocable Trust to own the primary residence can be an ideal solution to protect the house from the long-term care event, and the beneficiaries can still receive the step-up in cost basis when they inherit the house.

How Transfer on Death (TOD) Accounts Help You Avoid Probate

As an investment firm, we typically encourage clients to add TOD beneficiaries to their individual brokerage accounts to avoid the probate process, should the owner of the account unexpectedly pass away.  TOD stands for “Transfer on Death”.   When someone passes away, their assets pass to their beneficiaries in one of three ways:

1. Probate

2. Contract

3. Trust

Passing Asset by Contract

When you set up an IRA, 401(K), annuity, or life insurance policy, at some point during the account opening process, the custodian or life insurance company will ask you to list beneficiaries on your account.  This is a standard procedure for these types of accounts because when the account owner passes away, they look at the beneficiary form completed by the account owner, and the assets pass “by contract” to the beneficiaries listed on the account.  Since these accounts pass by contract, they automatically avoid the headaches of the probate process.

Probate

Non-retirement accounts like brokerage accounts, savings accounts, and checking accounts are often set up in an individual's name without beneficiaries listed on the account.  If someone that passes away has one of these accounts, the decedent’s last will and testament determines who will receive the balance in those accounts - but those accounts are required to go through a legal process called “probate”.  The probate process is required to transfer the decedent’s assets into their “estate”, and then ultimately distribute the assets of the estate to the estate beneficiaries.

Since the probate process involves the public court system, it can often take months before the assets of the estate are distributed to the beneficiaries of the estate.  Depending on the size and complexity of the estate, there could also be expenses associated with the probate process, including but not limited to court filing fees, attorney fees, accountant fees, executor fees, appraiser fees, or valuation experts.

For this reason, many estate plans aim to avoid probate whenever possible.

Transfer On Death Designation

A very easy solution to avoid the probate process for brokerage accounts, checking accounts, and savings accounts, is to add a TOD designation to the account.  The process of turning an individual account into a Transfer on Death account is also very easy because it usually only involves completing a Transfer-on-Death form, which lists the name and percentages of the beneficiaries assigned to the account. Once an individual account has been changed into a TOD account, if the account owner were to pass away, that account no longer goes through the probate process; it now passes to the beneficiaries by contract, similar to an IRA.

Frequently Asked Questions About TOD Accounts

After we explain the TOD strategy to clients, there are often several commonly asked questions that follow, so I’ll list them in a question-and-answer format:

Q:  Can you change the beneficiaries listed on a TOD account at any time?

A:  Yes, the beneficiaries assigned to a TOD account can be changed at any time by completing an updated TOD designation form

Q:  If I list TOD beneficiaries on all of my non-retirement accounts, do I still need a will?

A:  We strongly recommend that everyone execute a will for assets that are difficult to list TOD beneficiaries, such as a car, jewelry, household items, and for any other assets that don’t pass by contract or by trust.

Q: Can I list TOD beneficiaries on my house?

A:  It depends on what state you live in.  Currently, 31 states allow TOD deeds for real estate. New York became the newest state added to the list in 2024.

Q:  Can my TOD beneficiaries be the same as my will?

A:  Yes, you can make the TOD beneficiaries the same as your will. However, since TOD accounts pass by contract and not by your will, you can make beneficiary designations other than what is listed in your will. 

Q:  Can I list different beneficiaries on each TOD account (brokerage, checking, savings)?

A: Yes

Q:  Can I list a trust as the beneficiary of my TOD account?

A:  Yes

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What does TOD mean and how does it work?
TOD stands for “Transfer on Death.” It allows you to name beneficiaries on certain financial accounts—such as brokerage, checking, or savings accounts—so that the assets transfer directly to those beneficiaries when you pass away, bypassing the probate process entirely.

How is a TOD account different from probate or a trust?
Assets that pass through probate are distributed under a will and may take months to settle, while assets in a trust or TOD account pass directly to beneficiaries without court involvement. A TOD designation provides a simple, low-cost way to avoid probate for individual accounts.

Can I change the beneficiaries on my TOD account?
Yes. You can update or change your TOD beneficiaries at any time by completing a new Transfer-on-Death designation form with your financial institution. The most recent form on file will determine who receives the assets upon your passing.

Do I still need a will if I have TOD accounts?
Yes. A will is still necessary for assets that cannot have TOD beneficiaries, such as vehicles, personal items, or real estate in states that don’t allow TOD deeds. A will ensures these remaining assets are distributed according to your wishes.

Can I add TOD beneficiaries to my house or real estate?
In many states, yes. As of 2024, 31 states—including New York—allow Transfer-on-Death deeds for real estate. Rules vary by state, so it’s important to confirm eligibility and filing requirements where you live.

Can I name different beneficiaries on each TOD account?
Yes. You can assign unique beneficiaries and percentage allocations for each TOD account, giving you flexibility in how your assets are distributed.

Can I name a trust as the beneficiary of my TOD account?
Yes. You can designate a trust as your TOD beneficiary, which can be beneficial if your estate plan includes specific instructions for how and when assets should be distributed to heirs.

How to Avoid the New York State Estate Tax Cliff

When someone passes away in New York in 2025, there is a $7.16 million estate tax exclusion amount, which is significantly lower than the $13.9M exemption amount available at the federal level. However, in addition to the lower estate tax exemption amount, there are also two estate tax traps specific to New York that residents need to be aware of when completing their estate plan. Those two tax traps are:

1. The $7.5 million Cliff Rule

2. No Portability between spouses

With proper estate planning, these tax traps can potentially be avoided, allowing residents of New York to side-step a significant state tax liability when passing assets onto their heirs.

New York Estate Tax Cliff Rule

When it comes to estate planning, it’s important to understand that estate tax rules at the federal and state levels can vary.  Some states adhere to the federal rules, but New York is not one of those states.  New York has a very punitive “cliff rule” where once an estate reaches a specific dollar amount, the New York estate tax exemption is eliminated, and the ENTIRE value of the estate is subject to New York state tax.  

As mentioned above, the New York estate tax exemption for 2025 is $7,160,000. So, for anyone who lives in New York and passes away with an estate that is valued below that amount, they do not have to pay estate tax at the state or federal level.

For individuals that pass away with an estate valued between $7,160,000 and $7,518,000, they pay estate tax to New York only on the amount that exceeds the $7,160,000 threshold.

But the “cliff” happens at $7,518,000.  Once an estate in New York exceeds $7,518,000, the ENTIRE estate is subject to New York Estate Tax, which ranges from 3.06% to 16% depending on the size of the estate.

Non-Portability Between Spouses in New York

Married couples that live in New York must be aware of how the portability rules vary between the federal and state levels.  “Portability” is something that happens at the passing of the first spouse, and it refers to how much of the unused estate tax exemption can be transferred or “ported” over to the surviving spouse.  The $13.9M federal estate tax exemption is “per person” and “full portable”. Why is this important?  It’s common for married couples to own most assets “jointly with rights of survivorship”, so when the first spouse passes away, the surviving spouse assumes full ownership of the asset.  However, since the spouse who passed away did not have any assets solely in their name, there is nothing to include in their estate, so the $13.9M federal estate tax exemption at the passing of the first spouse goes unused.

At the federal level that’s not an issue because the federal estate tax exemption for a married couple is portable, which means if the first spouse that passes away does not use their full estate tax exemption, any unused exemption amount is transferred to the surviving spouse. Assuming that the spouse who passes away first does not use any of their estate tax exemption, when the second spouse passes, they would have a $27.8 million federal estate tax exemption ($13.9M x 2).

However, New York does not allow portability, so any unused estate tax exemption at the passing of the first spouse is completely lost.  The fact that New York does not allow portability requires more proactive estate tax planning prior to the passing of the first spouse. 

Here is a quick example showing how this works: Larry & Kathy are married and have an estate valued at $10M in which most of their assets are titled jointly with rights of survivorship.  Since everything is titled jointly, if Larry were to pass away in 2025, the $10M in assets would transfer over to Kathy with no estate taxes due at either the Federal or State level.  The problem arises when Kathy passes away 2 years later.  Assuming Kathy passes away with the same $10M in her name, there is still no federal estate taxes due because she more than covered by the $27.8M exemption at the federal level, however, because New York’s estate tax exemption is not portable, and her assets are well over the $7.5M cliff, the full $10M would be taxed by the New York level, resulting in close to a $1M tax liability.  A tax liability that could have been completely avoided with proper estate planning.

If instead of Larry and Kathy holding all of their assets jointly, they had segregated their assets to $5M owned by Larry and $5M owned by Kathy, when Larry passed away, he would have been able to use his $7.1M New York State estate tax exemption to protect the full $5M. Then, when Kathy passed with her $5M two years later, she would have been able to use her full $7.1M New York State tax exemption, resulting in $0 in taxes paid to New York State — avoiding nearly $1M in unnecessary tax liability.

Setting Up Separate Trusts

A common solution that our clients will use to address both the $7.5M cliff and the non-portability issue in New York is that each spouse will set up their own revocable trust, and then split the non-retirement account assets in a way to maximize the $7.1M New York State exemption amount at the passing of the first spouse. 

I will sometimes hear married couples say “Well, we don’t have to worry about this because our total estate is only $6 million.” That would be true today, but if that married couple is only 70 years old, and they are both in good health, what if their assets double in size before the first spouse passes? Now they have a problem. 

Special Legal Disclosure:  This article is for educational purposes only, and it does not contain any legal advice.  For legal advice, please contact an attorney.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQ):

What is the New York estate tax exemption for 2025?
In 2025, New York’s estate tax exclusion amount is $7.16 million per person, which is significantly lower than the federal estate tax exemption of $13.9 million. Estates valued below $7.16 million are not subject to New York or federal estate tax, but larger estates may face substantial state tax liability.

What is the New York “estate tax cliff rule”?
The “cliff rule” means that if an estate exceeds 105% of the exemption amount—$7.518 million in 2025—the entire estate becomes subject to New York estate tax, not just the amount above the threshold. Once an estate crosses the cliff, tax rates ranging from 3.06% to 16% can apply to the entire estate value.

How does New York’s estate tax differ from federal estate tax rules?
Unlike federal law, which allows full portability between spouses and a much higher exemption amount, New York has no portability and a lower threshold. This means any unused exemption at the first spouse’s death is lost unless proactive estate planning is done.

What does “non-portability” between spouses mean in New York?
Non-portability means a surviving spouse cannot use the unused estate tax exemption of their deceased spouse. Without planning, the first spouse’s exemption is forfeited, potentially exposing the surviving spouse’s estate to higher New York taxes later.

How can married couples avoid the New York estate tax cliff and non-portability issue?
Couples can establish separate revocable trusts and divide ownership of assets so that each spouse has enough in their name to fully use their individual New York estate tax exemption. This strategy allows both exemptions to be utilized and avoids unnecessary state taxes at the second spouse’s death.

Why does asset titling matter for estate tax planning in New York?
Jointly held assets automatically transfer to the surviving spouse and bypass the first spouse’s estate, preventing use of that spouse’s exemption. Properly titling assets between spouses or placing them in individual trusts ensures both exemptions can be applied.

When should New York residents start estate tax planning?
It’s wise to plan early—especially for couples whose combined assets approach or exceed $5–6 million. Asset growth, real estate appreciation, and investment performance can easily push estates over the $7.5 million threshold in the future, triggering significant tax liability without planning.