Providing for the distribution of assets after death is not a task eagerly approached by anyone. It is, however, a task we all must face. And, that's where trusts enter the estate-planning arena. A trust is simply an arrangement whereby one person holds legal title to an asset and manages it for the benefit of another. In one form or another, it may be used in personal financial planning.

The ability of the trust to bridge the gap between life and death is one of its most remarkable characteristics. In essence, the person establishing the trust may rule from the grave, not forever, but to the extent the law allows. Generally, a trust may be established to last for many generations, ending twenty-one years after the death of the last named beneficiary.

Often, an individual will establish a trust for his own benefit, not necessarily for tax purposes, but for many other reasons. He may want investment management, or he may want to invest in a new business venture with a strong potential but carrying a high risk. He could then use the trust to assure himself of an income in the event of failure. He may set up a family trust with the primary purpose of observing its operation and then eliminate any deficiencies that might appear in actual operation. He may feel that, while he presently is capable of managing his affairs, he is not sure about the future. In that case, a standby trust may serve a useful purpose.

On the other hand, trusts can be established for the benefit of others, such as a spouse, children, parents, or grandchildren. In addition, an individual may want to provide for what may be regarded as missing elements in the abilities, experience, or training of beneficiaries.

This is clearly the case where minors, or others deemed legally incompetent, are the intended recipients. But trusts may be created for the benefit of responsible, competent adults too-for the same reasons the person establishing the trust may want to set up a trust for himself. These reasons include freedom from management burdens, expert administration, mobility, and other practical reasons, the most important being cash savings.

While avoiding probate may be a consideration, the estate and gift tax savings made possible by the use of trusts may be of more importance in many cases. Use of the trust device can often permit a donor to transfer assets for the benefit of a beneficiary, while shielding such assets from the reach of creditors. The laws of most states permit the creation of so-called spendthrift trusts. Use of such trusts may permit the person establishing the trust to place both trust income and principal beyond the reach of the beneficiary's creditors. For the most part, these laws prevent the beneficiary from assigning any part of the interest in the income or principal of the trust since most creditors look to property that could freely be assigned by the beneficiary. Their attempts to reach assets can be thwarted or at least made more difficult. The person establishing the trust is generally permitted to make free use of his own assets, even if the result is to prevent a beneficiary from dealing with the trust's assets at will.

Care should be taken before trusts are established. In addition, be sure to seek the advice of a qualified legal professional before final decisions are made.

COBRA: The Health Insurance Safety Net If You Lose Your Job

For the millions of Americans who receive health insurance through their employer, the thought of losing their job—and their health insurance coverage—is an extremely distressing fear. A federal law known as the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, enables individuals who lose their employment-based group health coverage because they have lost their job (and for certain other reasons, known as “qualifying events”) to continue that coverage, at a cost, for a temporary period of time. The following Q&A provides a primer on the basics of COBRA continuation coverage.

Who is eligible? Under COBRA, group health plans sponsored by employers with 20 or more employees generally are required to offer employees and their dependents an extension of group health insurance coverage after a job loss. (If you have lost your job due to “gross misconduct,” your employer is not required to offer you COBRA coverage. Gross misconduct entails extremely wrongful actions on the part of an employee, such as those that are wanton, willful or reckless.) The law does not cover the District of Columbia, federal employees, particular church-related programs and most companies with fewer than 20 employees (although continuation might be available at the state level for small businesses).

However, if your employer drops all of its health plans, or goes out of business, it no longer has the obligation to continue your COBRA coverage. Additionally, if you move outside of the designated coverage area of your health plan, you can lose COBRA benefits.

When does coverage go into effect? If you are eligible for COBRA and lose your job either voluntarily or involuntarily, you may extend your coverage for yourself and your dependents for up to 18 months. An employer also can be required to offer COBRA coverage in situations other than a job loss. For example, if you become eligible for Medicare or you get divorced or legally separated, your spouse and dependent children can receive up to 36 months of continued health insurance coverage. Your dependent children also can receive up to 36 months of coverage if they lose dependent-child status on your health insurance plan.

You also may receive 29 months of COBRA coverage if you are qualified for Social Security disability benefits, lose your job and meet other specific requirements.

How much does it cost? COBRA requires an employer to make an offer of continuation coverage; it does not require the employer to pay for it, or to contribute to it on the same basis as it did when you had the coverage as an active employee. If you want COBRA coverage, your employer can require that you pay 100% of what the coverage costs (in other words, both the premium you had paid as an active employee, plus any share of the premium that your employer may have paid). In addition, your employer can require that you pay an additional 2% in administrative costs. COBRA premiums can be extremely expensive for someone who is unemployed, but because the premium is calculated on a group policy, it may be less expensive than a premium on an individual policy especially for individuals with pre-existing conditions.

What if I don’t want COBRA coverage? If you are eligible to receive COBRA coverage after losing your job, you may be thinking about turning down the coverage. Maybe you think it’s too pricey and you’re planning on finding a new job with health insurance very soon. However, you may want to reconsider.

Here’s why: Unless you have a firm job offer in hand, it can take you longer than you think to find new employment and when you do, there may be a waiting period before you are eligible for your new employer’s health benefits. In the meantime, you will be without health coverage and if you have an accident or are diagnosed with a serious illness, you may find yourself in quite a bind.

Furthermore, if you have a gap in insurance coverage longer than 63 days, you will lose your health insurance rights under HIPAA (the Health Insurance Portability and Accountability Act of 1996). This federal law guarantees that people with continuous health coverage cannot be denied health insurance even if they have a pre-existing condition. However, if your gap in coverage exceeds 63 days and you either already have a pre-existing condition or are diagnosed with a condition, you may have a hard time finding an insurer to cover you. Therefore, it may be best to accept COBRA coverage until you can find a new job with health benefits.

What if my company doesn’t offer COBRA? If you work for a smaller company that does not offer COBRA, you still may have “COBRA-like” rights through your state. Many states have implemented their own COBRA laws that offer employees at smaller companies the opportunity to purchase COBRA coverage.

Where can I learn more? As a federal law, COBRA falls under the Department of Labor’s jurisdiction. If you have questions about COBRA or grievances to report, you should contact your regional office of the Pension and Welfare Benefits Administration of the U.S. Department of Labor.

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