The question of whether a trust can cover the costs of telehealth subscriptions or virtual care platforms is becoming increasingly relevant as healthcare delivery evolves. Traditionally, trusts were utilized for more tangible expenses like medical bills, long-term care facilities, or in-home nursing. However, the modern landscape of healthcare necessitates a broader interpretation of what constitutes a legitimate “healthcare expense” payable from trust funds. The answer isn’t a simple yes or no, it hinges on the specific trust document’s language, the beneficiary’s needs, and applicable state laws. Approximately 79% of consumers now utilize some form of virtual healthcare, showing the widespread adoption and potential for trust inclusion (Source: American Telemedicine Association, 2023). It’s becoming more crucial than ever to review and update estate plans to address these evolving healthcare options.
What Qualifies as a Medical Expense for Trust Distribution?
To determine if a telehealth subscription is a permissible expense, we first need to define “medical expense” within the context of the trust. Most trusts define medical expenses broadly, encompassing care that alleviates illness or improves overall health. This typically includes doctor visits, prescriptions, hospital stays, and related services. Telehealth, in many cases, directly mirrors these traditional services, offering remote consultations, diagnoses, and even prescription refills. “A well-drafted trust anticipates future healthcare advancements, allowing for flexibility in addressing new care modalities,” emphasizes Steve Bliss, a San Diego Estate Planning Attorney. However, purely preventative or wellness subscriptions, such as those focused solely on fitness or general health tracking, may not qualify unless the trust specifically includes such provisions. The IRS generally considers expenses primarily for the prevention of disease, to maintain general health, or cosmetic purposes as non-deductible, which could impact trust distributions.
Is the Beneficiary’s Need Documented and Justified?
The justification for using trust funds isn’t solely about the *type* of expense, but also about the beneficiary’s specific *need*. If a beneficiary has a chronic condition that requires regular monitoring, telehealth can be a crucial component of their care plan. Documenting this need with a physician’s letter outlining the benefit of the telehealth subscription is essential. “We always advise clients to gather supporting documentation, even for seemingly obvious expenses, to avoid potential disputes with beneficiaries or the IRS,” states Steve Bliss. A beneficiary living in a rural area with limited access to specialists might particularly benefit from telehealth, creating a stronger justification for coverage. Additionally, if the telehealth subscription is demonstrably *more affordable* than traditional in-person care, it further strengthens the argument for its validity as a trust-funded expense.
What Does the Trust Document Actually Say?
This is the most critical piece of the puzzle. The trust document is the governing instrument, and its language dictates what expenses are permissible. Some trusts may explicitly list allowable expenses, while others use broader language such as “medical care, health, and maintenance.” If the trust document is silent on telehealth or virtual care, it requires careful interpretation based on the overall intent of the trust. A skilled estate planning attorney can analyze the trust document and provide guidance on whether a telehealth subscription falls within its scope. We recently had a client, Mr. Henderson, whose trust document contained the phrase “reasonable and necessary medical expenses.” After a detailed review, we determined that a telehealth subscription for his chronic heart condition aligned with the trust’s intent, provided we maintained thorough documentation of the medical necessity.
A Story of Oversight and Unexpected Costs
I recall a case involving Mrs. Davison, a lovely woman with a complex trust established by her late husband. She signed up for a virtual cognitive behavioral therapy platform to manage her anxiety, believing it would be covered by the trust. Unfortunately, the trust document narrowly defined “medical expenses” as those incurred at a licensed medical facility. The trustee initially denied the request, leaving Mrs. Davison responsible for the monthly subscription fee. She felt betrayed and frustrated, as she’d assumed the trust would cover all forms of legitimate healthcare. This situation highlighted the importance of proactive trust review and amendment to accommodate evolving healthcare options.
How Proactive Planning Saved the Day
Fortunately, after a thorough consultation, we were able to amend Mrs. Davison’s trust document to explicitly include telehealth services and virtual care platforms as permissible medical expenses. We submitted a formal request to the trustee, accompanied by a letter from her therapist outlining the medical benefits of the virtual therapy. The trustee approved the request retroactively, reimbursing Mrs. Davison for the previously paid subscription fees. This outcome underscores the power of proactive estate planning and the importance of adapting trust documents to reflect the realities of modern healthcare. Steve Bliss often emphasizes, “An adaptable trust is a resilient trust.”
Are There Tax Implications to Consider?
While the trust itself may not be directly subject to income tax, the distribution of funds to the beneficiary could have tax implications. Depending on the beneficiary’s tax bracket and the nature of the telehealth service, the distributed funds might be considered taxable income. It’s crucial to consult with a tax professional to understand the potential tax consequences of funding telehealth subscriptions from a trust. Additionally, the IRS may scrutinize expenses that appear unusual or excessive, so maintaining thorough documentation is essential to justify the legitimacy of the trust distributions.
What Steps Should Trustees Take Before Approving Telehealth Expenses?
Before approving a telehealth subscription as a trust-funded expense, trustees should take several key steps. First, they should carefully review the trust document to determine if the expense aligns with its terms. Second, they should obtain documentation from the beneficiary’s physician outlining the medical necessity of the telehealth service. Third, they should verify the legitimacy of the telehealth provider and ensure it’s appropriately licensed and qualified. Finally, they should consult with an estate planning attorney and a tax professional to ensure compliance with all applicable laws and regulations. These proactive measures can help trustees avoid disputes and protect the interests of the beneficiaries.
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 a trust amendment?” or “How do I open a probate case in San Diego?” and even “What happens if a beneficiary dies before me?” Or any other related questions that you may have about Trusts or my trust law practice.