When planning for long-term care, many individuals focus on purchasing insurance or setting aside assets to cover future expenses. However, financial abuse and mismanagement can derail even the best-laid plans. A long-term care trust offers a structured, protective approach to ensuring that funds are used appropriately, especially when an individual is no longer able to manage their own affairs.
What Is a Long-Term Care Trust?
A long-term care trust is a standby revocable trust designed to provide financial oversight for an individual’s long-term care needs. While the settlor (the person creating the trust) is capable, they retain control over the trust assets. However, the trust includes springing provisions—legal language that allows a successor trustee to step in and take over management if the settlor is deemed incapacitated.
The trust can own various assets, including long-term care insurance policies, life insurance policies with long-term care riders, and liquid assets designated for care-related expenses. Once the successor trustee takes over, they are responsible for filing insurance claims, paying expenses from the trust, and managing trust assets to ensure care needs are met.
Lessons from the John Amos and Mickey Rooney Cases
One of the most compelling reasons to consider a long-term care trust is to prevent financial exploitation, as tragically illustrated in the John Amos and Mickey Rooney cases.
John Amos, a well-known actor, who died in 2014, has been called a victim of elder financial abuse by his adult children, each claiming that the abuse was perpetrated by the other.
Mickey Rooney, another famous actor, provided powerful testimony before Congress about the financial abuse he endured in his later years. Rooney described how he was isolated, financially exploited, and left without access to his own money. His testimony shed light on the widespread issue of elder financial abuse and the devastating impact it can have on an individual’s dignity and well-being.
A long-term care trust may have helped prevent such abuse by placing financial oversight in the hands of a designated trustee rather than leaving assets vulnerable to manipulation by infighting siblings or self-serving outsiders. With a properly structured trust, all care-related expenses are managed transparently and according to predefined terms, reducing the risk of unauthorized withdrawals or misuse.
Key Benefits of a Long-Term Care Trust
Ensures Funds Are Used for Care Needs
By designating a trust to own long-term care policies and other assets, funds are explicitly earmarked for care expenses. This prevents potential misappropriation by well-meaning but financially strained family members.Streamlines Insurance Claims and Payments
Managing long-term care insurance claims can be overwhelming, especially when a person is already facing health challenges. The trustee, as the legal owner of the policy, handles all paperwork, ensuring that claims are filed correctly and benefits are used as intended.Protects Against Financial Exploitation
With a structured oversight system in place, there is a clear fiduciary duty to manage funds appropriately. The trustee must follow the trust’s terms, keeping records and providing transparency that minimizes opportunities for fraud or undue influence.Reduces Family Conflicts and Burdens
Family members often struggle with decisions about paying for care, especially when different parties have competing financial interests. A long-term care trust provides clear guidelines, removing ambiguity and reducing potential disputes.Offers Continuity and Professional Management
If a person becomes incapacitated, the transition of financial management is seamless. The springing provision allows for immediate oversight by the successor trustee, avoiding court intervention or delays that could disrupt care.
Selecting the Right Trustee: The Case for a Professional
Perhaps the most critical decision when establishing a long-term care trust is choosing the right trustee. While some individuals select a family member, this can create conflicts of interest, emotional strain, and potential mismanagement. Instead, using a professional trustee—either an institutional trustee (such as a bank trust department) or an independent professional trustee—offers significant advantages:
Objectivity – A professional trustee is neutral and bound by fiduciary duties, making decisions based on the trust’s terms rather than personal interests.
Expertise – Managing long-term care expenses requires financial, legal, and insurance knowledge that a professional trustee brings to the table.
Accountability – Unlike family members, professional trustees are legally required to keep records, report transactions, and manage funds prudently.
Reliability – Professionals are available long-term and will not face personal circumstances (such as illness or financial hardship) that might interfere with management duties.
A long-term care trust is a powerful tool for ensuring that assets are managed effectively, claims are handled properly, and financial abuse is prevented. By structuring the trust with springing provisions and selecting a professional trustee, individuals can safeguard their care needs and provide peace of mind for themselves and their families.
In a world where financial abuse and care mismanagement are real threats, a well-crafted long-term care trust offers a practical, protective, and proactive solution. Whether planning for yourself or helping a loved one, considering this option is a smart financial move that can make all the difference when it matters most.
