“The most common question faced by special needs parents and caregivers is, ‘What will happen to them, if I am not here?’”
This is only one of a million questions that parents of children with special needs or caregivers worry about every day, but it is always on their minds. Despite this worry, 72% of parents and caregivers have not yet named a trustee for their child or have not formally planned for their future care or guardianship. This is something that should be at the top of their to-do lists, says kake.com in the article “Special Needs Trusts are Always Available to those Who Need them.”
A Special Needs Trust, also known as an SNT, has many benefits for parents and caregivers, including peace of mind. Here’s what you need to know:
A special needs trust is a way to set aside money for a special needs child or individual. In 2016, President Obama signed the 21st Century Cures Act. This new law made a number of changes to existing laws about SNTs. It gave children with special needs and adults the ability to get funding through a trust. The assets are available to them, in addition to any existing government-funded programs they were receiving. With a SNT, the individual can receive their public help and the extra money also. That includes an inheritance or life insurance payment, after their parents or caregivers pass away.
There are a number of different types of SNTs, so it’s important to talk with an experienced elder lawyer who is familiar with the SNT laws and applicable law in your state. The most commonly used SNTs are called ‘self-settled’ trusts and ‘pooled’ trusts.
For a self-settled trust, the individual is allowed to create the trust by themselves, from their own money. If the individual is a minor, a parent or guardian must establish the trust and determine when the individual may take funds from it. Those who are not minors, may create this type of trust without the approval of the court.
A pooled trust is typically created when the individual is older than 65 and establishes the trust on their own.
A trustee must be named for the trust. This should be someone in whom the parents have great faith and confidence.
The biggest benefit for parents or caregivers is the peace of mind of knowing that the disabled individual will have access to additional funds, if they need them. Speak with an estate planning or elder law attorney who can help create the type of trust appropriate for your situation.
Reference: kake.com (Nov. 16, 2019) “Special Needs Trusts are Always Available to those Who Need them”
he most common question faced by special needs parents and caregivers is, ‘What will happen to them, if I am not here?’”
“A solid estate plan should include your will, a power of attorney and a trust. All of these components provide asset protection for your business while you’re alive and after your death.”
A business owner without an estate plan, is a business owner whose business and personal estate are both in jeopardy, says the Augusta Free Press in an article that asks “Own a business? 5 reasons you need an estate plan.”
You need more than a will to plan for incapacity. If you become ill or incapacitated, a will isn’t the estate planning tool that will help you and your family. What you need is a power of attorney (POA). This document names another individual or individuals to manage your finances and your business dealings, while you are unable to do so. Your estate planning attorney can create a power of attorney that limits what the named person, known as an “agent” may do on your behalf, or make it a broad POA so they can do anything they deem necessary.
Your state’s estate plan may not align with your wishes. Every state has its own laws about property distribution in the event a person does not have an estate plan. A popular joke among estate planning attorneys is that if you don’t have an estate plan, your state has one for you—but you may not like it. This is particularly important for business owners. If you have a sibling who you haven’t spoken to in decades, depending upon the laws of your state, that sibling may be first in line for your assets and your business. If that makes you worried, it should.
Caring for a disabled family member. A family that includes individuals with special needs who receive government benefits requires a specific type of estate planning, known as Special Needs Planning. This includes the use of trusts, so a trust owns assets the assets for the benefit of such a family member without putting government benefits at risk.
Help yourself and heirs with tax liability. If your future plan includes leaving your business to your children or another family member, there will be taxes due. What if they don’t have the resources to pay taxes on the business and have to sell it in a fire sale just to satisfy the tax bill? An estate plan, worked out with an experienced estate planning attorney who regularly works with family-owned businesses, will include a comprehensive tax plan. Make sure your heirs understand this plan—you may want to bring them with you to a family meeting with the attorney, so everyone is on the same page.
Avoid fracturing your own family. An unhappy truth is that when there is no estate plan, it impacts not just the family business. If some children or family members are involved in the business and others are not, the ones who work in the business may resent having to share any of the business. How to divide your business is up to the business owner. However, making a good plan in advance with the guidance of an experienced advisor and communicating the plan to family members will prevent the family from falling apart.
There’s no way to know how family members will respond when a parent dies. Sometimes death brings out the best in people, and sometimes it brings out the worst. However, by having an estate plan and business plan for the future, you can preclude some of the stresses and strains on the family.
Reference: Augusta Free Press (August 13, 2019) “Own a business? 5 reasons you need an estate plan.”
“If you are single or are a widow or widower and will likely never return home after moving into a Medicaid certified nursing home, the house can be sold, and planning might be done with the proceeds of the sale.”
Anyone who owns a home, whether a magnificent mansion or a modest ranch, worries about the possibility of losing the home because of long-term care. How can they keep the home for their spouse or even for their family, if they need to apply to Medicaid for long-term nursing care costs?
The problem, reports The Mercury in a recent article “Protecting your house and Medicaid” is often the strategies that people come up with on their own. They usually don’t work.
The first thought of someone who is confronted with the need to qualify for Medicaid is to immediately transfer ownership of the family home to another person. The idea is to take the home out of their countable assets. But unless the person who receives the house is an adult child, that transfer only leads to problems.
Medicaid’s basic premise is that if you can afford to pay for your own care, you should. Transfer of a home, let’s say one with a value of $400,000, means that a $400,000 gift has been given to someone. There is a five-year lookback period. Any assets given away or transferred in that five-year period means that you had the asset under your control. Medicaid will not pay for your care in that case.
There are some exceptions to the gifting rules, but this is not something to be navigated without the help of an experienced elder law estate planning attorney. Here are the exceptions:
Your spouse. It’s understood that your spouse needs a place to live, and a transfer of the home to your spouse does not result in penalties under Medicaid rules. This usually means transfer from title as joint tenants with rights of survivorship or tenants by the entireties to the healthier wife or husband. It is also understood that a transfer to your spouse at home is not a disqualifying transfer. This is a common practice and part of Medicaid planning.
A disabled child. A parent may transfer a house to their disabled child on the theory that it is needed for self-support. It is not necessary for a child to lose a home, because a parent will be on Medicaid. This is a common mistake, and completely avoidable. Talk with an elder law attorney to learn more.
If a child is a caretaker. An adult child who moves in with the parents for a period of at least two years to care for them so they could stay at home and avoid going to a nursing home, or if the child has lived with their parents for longer than that and they need this care at home, under federal law the home can be transferred to the child without penalty and the parent can go to a nursing home and receive care under Medicaid. This is another very common mistake that causes adult children to be left without a home.
For a person who is single or a widow or widower who will never move home after moving into a Medicaid certified nursing home, the house may be sold, and planning can be done with the proceeds of the sale. Paying bills to maintain a vacant home for no reason and having the government take the home as a creditor through the estate recovery program does not make sense. An elder lawyer estate planning attorney can help navigate this complex and often overwhelming process.
Reference: The Mercury (July 31, 2019) “Protecting your house and Medicaid”
It is best to expand from daily considerations to the future as well.
Parenting and planning is difficult enough. However, if a special needs child is involved, then planning needs to include what will happen when the parents are no longer available, according to Newsday in “Be ‘biggest advocate’: Parents plan future for adult children with special needs.”
As an adult child with disabilities ages, eventually there will be medical issues. If the parents are gone, who will be able to make medical decisions? Where they live, who will oversee their finances and who will be there for them to rely on in a parenting role? There are many questions and they all need answering.
For one family, raising their special needs daughter was a full-time challenge. Their daughter, now 24, has autism. The couple sought out others in their same situation, noting that often even their own family members could not relate to their daily experiences.
It takes a village for special needs families to do more than survive. That includes estate planning and elder law attorneys with deep experience in special needs planning, social workers, therapists and medical professionals. Here’s what needs to be top-of-mind:
Don’t wait to plan. Families often think they have time, but you never know when unexpected events occur. Have a plan in place for legal guardianship, finances and health care.
Work with experienced legal help. You want to work with an attorney who has a great deal of experience and knowledge in special needs law and estate planning. Someone who dabbles on the side of a real estate practice is not the right professional for the task.
Stay in control. When children turn 18, they are adults. Parents and guardians will need to go through Surrogate’s Court to become the child’s guardian. Unless that is done, the parents and guardians will have no legal rights about the child’s medical, financial or other affairs. A successor guardian also needs to be named, so that when the parents are no longer able to serve, someone is in place to care for the child.
Create a Special Needs Trust. A trusts attorney with experience in Special Needs planning will be able to work with the family to create and structure a Special Needs Trust (SNT). A disabled person usually cannot earn enough to support himself, or the caregiver who remains at home to care for them and care-related expenses. The SNT helps to meet current needs and plan for future needs. The trust is used to preserve eligibility for any means-tested state and federal benefits. It allows the individual to have a better quality of life, by providing for expenses that are not covered by their benefits.
It’s very important that no assets be left to the child in an inheritance. Any assets must be placed in the trust. A well-meaning relative could put their eligibility for aid in jeopardy.
Parents and guardians also need to name a trustee and a successor trustee. The person needs to be competent, good with money management, organized and focused on caring for the loved one. It cannot be an emotional decision.
Parents of special needs children are advised to create a Letter of Intent, a narrative that outlines their child’s likes and dislikes, strengths and weaknesses, activities and friends they enjoy and other details that will help them to continue an enjoyable life, when their parents are gone.
Parent’s own estate planning must be done with an eye to maintaining the SNT and caring for their other children. This is a case when assets need to be distributed in a realistic and fair manner. If one sibling is the successor trustee, for example, they may need a larger portion of an estate to help care for their sibling.
An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and may include special needs.
Reference: Newsday (May 9, 2019) “Be ‘biggest advocate’: Parents plan future for adult children with special needs.”
It is important to have a plan and important to keep it up to date.
If you don’t have an estate plan, your family can face some really difficult times and find themselves in a disagreement that can cause harm, according to The San Diego Union-Tribune in “6 estate-planning mistakes to avoid.”
Even attorneys run into problems with their family estate plans. One attorney was devastated when her mother was diagnosed with Alzheimer’s disease. As the mounting costs continued for 10 years, and tragedy struck again when her two older brothers died just before her mother passed away, she learned first hand just how important having a plan in place can be for the family. Without a plan, everything is more challenging and costly. Here are the top six mistakes that people make:
Not having a plan. No one wants to think about death, dying or incapacity, especially when they are relatively young and healthy. However, that is the best time to put a plan in place. Start by making sure you have powers of attorney for both health care and finances. Otherwise, you risk having the court making decisions on your behalf, instead of a trusted family member.
Not communicating your plan or wishes. Make sure that your loved ones know what your plan is. The people who have been chosen as your financial power of attorney and health care power of attorney need to know that they have been named and what your wishes are. Having a plan is step one. Communicating its wishes and its location is step two. Miss one step, and the plan is worthless.
Doing estate planning only with taxes in mind. A comprehensive estate plan addresses much more than tax planning. It includes charitable giving, planning for a family member with special needs, succession planning, planning for children from a prior marriage, planning for your pets and more.
Leaving assets directly to minors. Giving assets to a minor will lead to the necessity of the court appointing a custodian or guardian, if one is not named in your will. There may be problems with a court-appointed guardian, who may have a different idea of how the money should be used, not to mention associated costs.
Neglecting to update how assets are titled. Today’s family often means a blended family. Therefore, how assets are titled can have a big impact. If one spouse purchased a home long before the second spouse and their children joined the household, who inherits the house? There are tax consequences and control issues that arise in a blended family that requires advance planning and a lot of communication. In community property states, this can become particularly messy.
Failing to fund or update trusts. If a trust is not funded, it will not achieve its desired outcome. Assets that are not retitled when trusts are created, will not avoid probate. These are the details that make or break an estate plan.
An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances, as well as keeping it up to date as changes occur in your life.
Reference: The San Diego Union-Tribune (April 18, 2019) “6 estate-planning mistakes to avoid”
Some common mistakes can be costly to your loved ones.
Life insurance is a very handy tool, when it comes to estate planning. However, unless you are careful, it is possible that it won’t accomplish what you intended, according to The Washington Post, in “Don’t make these big life insurance blunders.”
Here are the common mistakes that financial planners see:
Too much or not enough. Not everyone needs life insurance. If no one is depending on your income, you may not need any. However, if you have young children, and especially if you are the only breadwinner, then you need a lot. Even a stay-at-home parent needs coverage. If you died, how would the surviving spouse cover the cost of child care and all the other tasks that are done by the stay-at-home parent?
One rule of thumb is to purchase seven times the amount of your annual salary, plus money for college educations. That’s a lot of insurance, but the protection is well worth it.
Buying the wrong kind of policy. There are two kinds of policies, and they serve very different purposes. Term life is simple and cheap. It offers coverage for a specific amount of time, usually 10, 20 or 30 years. If you die while the policy is in effect, it pays proceeds to the beneficiaries. If you live past the term, it has no value. It’s a good pick for most families, offering protection when kids are young or there’s a mortgage that needs to be paid. The idea is that, at the end of the term, you don’t need the insurance anymore.
There’s also permanent or whole life insurance. Many people get sold these policies, usually with the argument that they are building cash value. The problem is that the fees and agent’s commissions consume a lot of that value. One school of thought says to instead put money into tax-advantaged retirement accounts. If you’ve got money left over, use a low-cost index fund instead of funding a life insurance policy.
Permanent life insurance is valuable if there is a special needs child who will be financially dependent on the parents. In that case, speak with an elder law attorney with special needs planning experience.
Depending on the life insurance in your employee benefits package. Check with the HR department to make sure you know how much coverage your work benefits provides. It’s likely not enough to protect your family. When you leave the company, the coverage ends.
Procrastinating the purchase. Many people treat the purchase of life insurance the way they do having their wills and estate planning done. There’s always something else that needs to be done first. However, if you wait too long, it may become more expensive. Get a few quotes from reputable companies and make a decision.
An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and may include choosing the correct life insurance to accomplish your goals.
Reference: The Washington Post (Nov. 1, 2018) “Don’t make these big life insurance blunders”