If you care for a child or other loved one with a disability, you’ve no doubt thought about what will happen when you’re no longer able to give that care. There is a solution. You can leave property and funds to your disabled loved one in a special needs trust without jeopardizing their government benefits.
Problems can arise when disabled individuals inherit an estate. Their assets usually rise above the “limits” and benefits will cease until the inheritance is sold, spent and used up. The special needs trust allows you to protect your loved one’s benefits while supplementing their needs. The trust is merely a container used to hold property and money that will supplement your loved one’s government benefits-whether they are Supplemental Security Income, Medicaid or another program.
These programs have limits to what a disabled person’s income and total assets must be. A person must have less than $600-$800 of monthly income and less than $2,000 worth of total liquid assets. If a disabled person’s income or assets rises above those limits then their income and health care they receive from those government programs will cease. Fortunately, special needs trusts are a widely accepted and legal estate planning tool that will allow a disabled person to use their inheritance as a supplement for their special needs. The disabled person cannot be the trustee of the trust. I usually recommend a corporate trustee as following special needs trusts can be complicated. There are many rules to follow to ensure the trust operates properly and benefits are not lost.
Special needs trusts are very complicated to draft. It is a good idea to use your entire team of estate planning professionals (life insurance agents, financial planners, accountants, corporate trustees and attorneys) to ensure you are making the right decision. As always, please do not ever hesitate to contact me to discuss this and any other estate planning need or goal.
Kris Boyd; (501) 372-1616; kris@krismboyd.com
1! Ha, ha, ha...
I give out a lot of advice and pointers on what to plan for and what to include in your estate plan. I wanted to change it up a little and help families avoid the mistakes that can lead to disasters in the future. There is nothing worse than thinking you have your planning in place which takes care of everyone you love and then realizing it is worthless.
#1. The Total Package
The number one mistake planners make is having a will only and thinking that is all they need. A will is only one part of a complete estate plan. Trusts, power of attorneys, living wills and memorial plans round out a complete estate plan.
#2. The Do-It-Yourself Kit
I have re-written numerous estate plans for families after they paid money for a do-it-yourself kit bought off of the internet or at a bookstore only to realize it did not take care of their needs. Every state has different laws and these kits will not always create documents that will stand up to attack in your state. Furthermore, they are designed only to handle the simplest of estates. I have yet to see one take care of a situation in a blended family where both parents are divorced, have children together and children from a previous marriage.
#3. Hiring The Wrong Professional
You would not hire an electrician to handle your plumbing problems. Be sure you do your research and hire an attorney who focuses in estate planning. Estate planning laws are fluid. Bankruptcy laws are as well. You would NOT want to hire me as your bankruptcy attorney.
#4. One Trust Fits All
Trusts are very important estate planning tools. However, trusts are not appropriate for all families and situations. Avoid the estate planner who suggests a trust every time. Also, avoid the estate planner who charges a flat rate for trusts. Some trusts take an hour to create while others can take many, many hours.
#5. Trusts for Minor Children
Trusts are very appropriate for families with minor children and minor grandchildren. Minors cannot legally own anything. The guardian of the minor ends up “owning” the property and money. This can lead to problems in and of itself. Also, most families do not want to ”dump” a large amount of money on an 18 year old. I know I probably would not have saved much of it when I was 18 if several hundred thousand dollars fell into my lap. I would have driven a really cool Lamborgini, though.
#6. Not Declaring Guardians for Your Children
Most families do not realize that you can declare who you want to take care of your chidren if something were to happen to both parents. This is one of the most important decisions you will ever make. Do not exclude it from your planning.
#7. Designate Your Beneficiaries
All of your accounts (banking, investment, retirement and life insurance) have beneficiary designations that you need to complete. You state where you want your money to go to. These accounts will avoid probate if you take care of the beneficiary designations. You can even designate the money to go to your trust if you are leaving it to a minor child or grandchild.
This list could have been entitled “100 Estate Planning Mistakes You Do Not Want To Make”. That would have been a tough read, but it hammers the point home that you need to meet with the proper estate planning attorney to ensure that your plan is exactly what you need.
Here is a great article from Larry Deason about ensuring that your baby is taken care if something were to happen to you.
A qualified estate planning attorney, who focuses his or her practice in estate planning, can help you put together a comprehensive plan that will care for you and your child in the event of your incapacity or even your death. Protect yourself and your baby from the unexpected. Call and schedule an appointment with an estate planning attorney today. You’ll sleep better once you do … at least when the baby lets you!
http://www.yumasun.com/articles/child-61399-health-guardian.html
I have been working on a Will for a new client. She had a Will executed just a few years ago. That Will contained maybe 50 bequests of specific property, things like furniture, furnishings, and jewelry. She wants to change the Will because some of her beneficiaries have died, and because she wants to remove and add others. In order to accomplish this, we will have to draft an entirely new Will or a Codicil. Codicils are seperate documents that alter the terms of a Will. I never reccommend these because what happens if a person has executed one or more Codicils, but the Codicils are not found with the original Will? The Codicil is not worth anything and the terms of the original Will are followed if this happens.
Dispersing tangible property like this is much easier if it’s done within the context of a trust:
1. As part of the living trust process, we assign the client’s tangible personal property to the trust.
2. The trust includes a provision allowing the client to leave a written direction, telling where specific items will be distributed upon his death. The trust also contains a default provision for items not listed in the written direction.
3. Because the written direction is not part of the Will, it isn’t subject to the execution formalities of a Will. The above written direction can be changed as often as the client wishes, by the client (so no attorney involvement is needed) — it’s really just a note, left with the client’s other important papers.
Have you ever had to take on the tedious process of probating an estate of a loved one? Do you know there are ways to avoid the costly attorney fees, heartache and months and even years that come along with probate court? Placing property inside a trust that would normally have to be probated is a great way to avoid probate court. There are a multitude of reasons families create trusts. Avoiding probate is one of the most popular. Trusts can be complicated, but I try to make them as simple to understand as I can. Additionally, make sure all of your accounts have the proper beneficiary designations. Most accounts can pass outside of probate directly to your beneficiary if you have them set up the correct way.
