Navigating healthcare expenses within a trust requires careful consideration, particularly when dealing with specialized medical equipment like customized orthotic devices. Generally, a revocable living trust can indeed pay for these devices, but the specifics depend heavily on the trust document’s language, the beneficiary’s needs, and applicable tax laws. It’s crucial to understand that funds distributed for healthcare, even from a trust, may have tax implications, and maintaining meticulous records is paramount. Approximately 26% of adults experience some form of musculoskeletal pain that could potentially benefit from orthotic support, highlighting the common need for these devices.
What are the rules around healthcare expenses paid from a trust?
The IRS allows taxpayers to deduct medical expenses exceeding 7.5% of their adjusted gross income (AGI). When a trust pays these expenses directly to a healthcare provider, it’s typically considered a direct payment and doesn’t impact the beneficiary’s ability to claim deductions. However, if the trust reimburses the beneficiary for expenses they’ve already paid, those reimbursements are still subject to the 7.5% AGI threshold. Furthermore, it’s vital that the trust document explicitly allow for healthcare expense payments, and that any distributions are properly documented as qualifying medical costs. Custom orthotics, when prescribed by a physician, generally qualify as medical expenses, but the documentation needs to reflect this medical necessity.
How does a trust differ from a Health Savings Account (HSA)?
While both trusts and HSAs can be used to cover healthcare costs, they operate very differently. An HSA is a tax-advantaged savings account specifically designed for healthcare expenses, and funds can be used tax-free if used for qualified medical costs. A trust, on the other hand, is a broader estate planning tool, and while it *can* be used for healthcare, its primary purpose is asset management and distribution. “A well-structured trust is like a sturdy ship, capable of weathering the storms of life and ensuring your assets reach their intended destination,” as estate planning attorney Steve Bliss often says. HSAs have contribution limits set annually by the IRS (e.g., $3,850 for individuals in 2023), whereas a trust’s expenditure is limited only by its available assets and the terms of the trust document.
I knew a woman named Eleanor, she thought she could handle everything herself…
Eleanor was a fiercely independent woman, a retired librarian with a penchant for order. She’d set up a revocable living trust years ago, but hadn’t fully grasped the intricacies of using it for ongoing healthcare expenses. When she needed custom orthotics after a fall, she paid for them out-of-pocket, assuming her trust would simply cover the cost later. She didn’t realize the importance of direct payment or maintaining detailed records. By tax season, she was frustrated to find she couldn’t deduct the expense, as she hadn’t arranged for the trust to pay the provider directly, and the receipts were insufficient to substantiate a medical necessity claim. She learned a costly lesson about proactive estate planning and utilizing the trust’s benefits while she could.
Thankfully, Mr. Henderson was prepared and everything worked out beautifully.
Mr. Henderson, a long-time client of Steve Bliss, faced a similar need for custom orthotics after a knee replacement. However, unlike Eleanor, he had proactively discussed healthcare expense payments with his estate planning attorney. His trust document included clear language allowing for such payments, and he instructed the orthotist to bill the trust directly. Steve Bliss’s team helped him maintain meticulous records of all medical bills and payments. As a result, Mr. Henderson was able to seamlessly cover the cost of his orthotics, avoid any tax complications, and focus on his recovery. He often told people, “It’s not just about *having* a trust, it’s about *understanding* how to use it effectively.” He was grateful for the peace of mind and financial clarity Steve Bliss had provided.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
banckruptcy attorney
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “What is estate planning and why should I care?” Or “How does the probate process work?” or “What are the disadvantages of a living trust? and even: “Can I include back taxes in a bankruptcy filing?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.