11/22/2010 @ 8:01:AM By Moynihan_Lyons
In this post we will cover two additional mistakes people can make in planning for family members with special needs.
Relying on siblings to use their money for the child with special needs’ benefit. Parents may be relying on their other children to provide for the special needs child from their own inheritances. This can be a temporary solution for a brief time such as during a brief incapacity if their other children are financially secure and have money to spare. However, it is not a solution that will protect the child with special needs after the parent/s dies or when siblings have their own expenses and financial priorities.
Here’s what can happen…
What if the inheriting sibling divorces or loses a lawsuit? His or her spouse (or a judgment creditor) may be entitled to half of it and will likely not care for the child with special needs. What if the sibling dies or becomes incapacitated while the child with special needs is still living? Will his or her heirs care for the child with special needs as thoughtfully and completely as the sibling did?
Siblings of a child with special needs often feel a great responsibility for that child and have felt so all of their lives. When parents are able to provide clear instructions and a helpful structure, they lessen the burden on all their children and support a loving and involved relationship among them.
Failing to protect the child with special needs from predators. An inheritance from parents who fund their child’s special needs trust by will rather than by a revocable living trust is in the public record. Predators are particularly attracted to vulnerable beneficiaries, such as the young and those with limited self-protective capacities. When you plan using a trust, rather than a will, the parent can decide who has access to the information about the child’s inheritance. This protects the special needs child and other family members, who may be serving as trustees, from predators.
In conclusion, planning for special needs beneficiaries requires particular care and the participation of the family’s entire “advisory team.” The estate planning and/or elder law attorney plays a pivotal role in ensuring the future well-being of a special needs child.
A properly drafted and funded Special Needs Trust can ensure that the beneficiary has sufficient assets to care for him or her, in a manner consistent with the parent’s wishes, throughout the beneficiary’s lifetime.
Posted Under: Comprehensive Estate Planning, Revocable Living Trusts, Special Needs Trusts, Trust Administration
Tags: , Planning, Special Needs, Special Needs Trust
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11/15/2010 @ 8:01:AM By Moynihan_Lyons
So far, we have shown five common mistakes families can make.
Here are some additional issues people are likely to encounter…
Failure to properly “fund” and maintain the plan. When planning for children with special needs, it is absolutely critical that there are sufficient assets available for the special needs beneficiary throughout his or her lifetime. In many instances, this requires utilization of a funding vehicle that can ensure liquidity when necessary. Oftentimes permanent life insurance is the perfect vehicle for this purpose, particularly if the clients are young and healthy such that insurance rates are low.
It should be noted that because this is an ever-changing area, it is imperative to revisit the plan frequently to ensure that it continues to meet the demands of the special needs beneficiary.
Some situations may require special strategies. For example, if the client is potentially subject to estate tax, an Irrevocable Life Insurance Trust can own and be the beneficiary of the policy, naming the Special Needs Trust as the beneficiary. Alternatively, in a non-taxable situation, it is also possible to name the client’s revocable trust as the beneficiary to help equalize inheritances if that happens to be the objective.
Choosing the wrong trustee. As a parent (or grandparent) of a special needs child, you will be able to manage the trust as long as you are alive. However, when you are no longer able to serve as trustee, you can choose who will serve according to the instructions you provide. It is possible to choose a team of advisors and/or a professional trustee. It is critical that the person’s chosen be financially savvy, well-organized, and of course, ethical.
Failing to invite contributions from others to the trust. A key benefit of creating a Special Needs Trust now is that the beneficiary’s extended family and friends can make gifts to the trust or remember the trust as they plan their own estates. For example, these family members and friends can name the Special Needs Trust as the beneficiary of their own assets in their revocable trust or will. They can also name the Special Needs Trust as a beneficiary of life insurance or retirement benefits.
Posted Under: Comprehensive Estate Planning, News, Special Needs Trusts, Trust Administration
Tags: , Planning, Special Needs, Special Needs Trust
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11/8/2010 @ 8:00:AM By Moynihan_Lyons
In today’s post, we continue looking at the problems typically encountered in planning for family members with special needs.
Ignoring the special needs when planning for the child’s benefit. Planning that is not designed with the child’s special needs in mind will probably render the child ineligible for essential government needs. A properly designed Special Needs Trust promotes the special needs person’s comfort and happiness without sacrificing eligibility. This Trust can be used as the vehicle to pass assets to the child. Otherwise, those assets may disqualify the child from public benefits and might become available to repay the state for the assistance provided.
Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (for example, a specially equipped van), training and education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive spending money, electronic equipment and appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses. These are the kinds of things parents may currently provide for their child or other special needs beneficiary.
Creating a “generic” special needs trust that doesn’t fit. Even some “special needs trusts” are unnecessarily inflexible and generic. Although an attorney with some knowledge of the area can protect almost any trust from invalidating the child’s public benefits, many trusts are not customized to the particular child’s needs. Thus the child fails to receive the benefits that the parent provided when they were alive.
Another frequent mistake occurs when the Special Needs Trust includes a “pay-back” provision rather than allowing the remainder of the trust to go to others upon the death of the special needs child. While these “pay-back” provisions are necessary in certain types of special needs trusts, an attorney who knows the difference can save your clients hundreds of thousands of dollars, or more.
The take home message is that you need to make sure that your attorney is well versed in special needs legal planning.
Posted Under: Comprehensive Estate Planning, Special Needs Trusts, Trust Administration
Tags: , Planning, Special Needs, Special Needs Trust
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11/3/2010 @ 11:19:AM By Moynihan_Lyons
There are unique planning requirements for families with children, grandchildren or other family members (such as parents) with special needs. However, a lot of misconceptions exist in this area that result in costly mistakes in planning for special needs beneficiaries.
In this post we will cover the three most common mistakes related to special needs planning.
Disinheriting the child. Many disabled people rely on SSI, Medicaid/Medi-Cal or other government benefits to provide food and shelter. Some parents may have ben advised to disinherit their disabled child – the child who needs their help most – to protect that child’s public benefits. However, these benefits rarely provide more than basic needs. Also, this “solution” does not allow the parent/s to help the child after the former becomes incapacitated or is gone.
When a child requires, or is likely to require, governmental assistance to meet his or her basic needs, parents, grandparents and others who love the child should consider establishing a Special Needs Trust. This tool can protect public benefits and care for the child during the client’s incapacity or after the clients’s death.
Procrastination. Because none of us knows when we may die or become incapacitated, it is important that you plan for a beneficiary with special needs early on, just as you should for other dependents such as minor children. However, unlike most other beneficiaries, a child with special needs may never be able to compensate for a failure to plan. A minor beneficiary without special needs can obtain more resources as he or she reaches adulthood and can work to meet essential needs, but a child with special needs may never have that ability.
Failure to coordinate a planning team effort. Ideally, an elder law attorney experienced in special needs planning should be a key member of the client’s planning team. Other important members of this group are: (a) a life insurance agent who can ensure that there will be enough money to maintain the benefits for the special needs child, (b) a CPA who can advise on the Specials Needs Trust’s tax return; (c) an investment advisor who can ensure that the trust’s funds resources will last for the child’s lifetime; (d) any other advisors (such as a care planning expert, if needed) that may support the goals of the trust going forward.
Posted Under: Estate Planning, Special Needs Trusts, Trust Administration
Tags: , Planning, Special Needs, Special Needs Trust
Comments: 0
9/28/2010 @ 4:07:PM By Maureen Lyons
These are difficult times. Consumer confidence is low, and its a long way before the economy is expected to fully recover. Many of us are concerned, wondering what planning we should do now, if any.
For the vast majority of Americans, planning is not discretionary. These individuals continue to have personal concerns that they need to address now because these concerns are unrelated to the economy. In fact, some of these issues may even be made worse by our current economic situation.
In addition, for anyone who may be subject to federal or state tax in the future, unusual circumstances have created a “perfect planning storm” that may not last long. This post addresses some of the planning needs unrelated to the economy, and discusses strategies that create the biggest planning opportunities today.
Here are the basic planning needs that are not directly related to the economy:
- Disability and retirement planning
- Special needs planning
- Beneficiary protection planning (for example, protection from divorce, creditors and/or perhaps the beneficiaries themselves)
- Second marriage and “blended family” protection
These planning needs are often more critical for those with fewer assets than for those with more wealth.
Disability Planning.
We’ve covered disability planning in a previous post. Let’s do a quick review.
According to the Family Caregiver Alliance and a recent MetLife Mature Market Study, of those Americans currently age 65 or older:
- 43% will need nursing home care
- 25% will spend more than a year in a nursing home
- 9% will spend more than 5 years in a nursing home
- the average stay in a nursing home is more than 2.5 years.
Nursing home costs are increasing much faster than the inflation rate would imply. Thus, many of us are quite appropriately worried about how we will pay for that kind of care when we need it.
Also of concern to many people is who will provide long term care and whether those caregivers will care for us in the way we desire. For many, there is a strong desire to stay at home as long as possible. For others, the companionship found in an assisted living facility makes that choice preferable. Still others need care that cannot be provided at home or only at a prohibitive cost. Not surprisingly, these goals often change over time and with changing circumstances.
In light of these challenges, it is critical that you create a trust that sets forth your current, carefully thought out “disability objectives” — to ensure that if and when the time comes you and your loved ones are prepared.
Special Needs Planning.
Special needs planning is another area unrelated to the economy. According to the 1002 U.S. census:
- 51.2 million people reported having a disability
- 13-16% of families have a child with special needs
- Autism occurs every 1 in 150 births and between 1 and 1.5 million Americans have an Autism spectrum disorder
Failure to properly plan for a person with special needs can have disastrous consequences, especially if the person is receiving government benefits. The Special Needs Trust that incorporates specific care provisions is a critical component of the planning necessary for a special needs person who needs ongoing support. Insurance on the lives of the parents or grandparents of a special needs person frequently funds the ongoing care of that special needs beneficiary.
In our next post we will talk about beneficiary, as well as blended family, planning…
Posted Under: Comprehensive Estate Planning, Estate Planning, Special Needs Trusts
Tags: , Disability, Estates, Planning
Comments: 0
7/26/2010 @ 9:39:PM By Moynihan_Lyons
Today, Monday, July 26, 2010, marks the 20th anniversary of the Americans With Disabilities Act – the landmark legislation addressing civil rights of people with disabilities. Listen to President Obama’s comments at 2:30pm PDT.
Posted Under: Estate Planning, News, Special Needs Trusts
Tags:
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4/16/2010 @ 10:51:AM By Moynihan_Lyons
Are you prepared? Have you given someone the legal authority to make medical decisions on your behalf if you are unable to do so through an Advance Directive or Healthcare Power of Attorney? Does that person know what you want AND what you don’t want? Do you have a Living Will which addresses your end-of-life choices? Don’t wait. Plan now.
Posted Under: Care Coordination, Comprehensive Estate Planning, Estate Administration, Estate Planning, IRA Retirement Trusts, Laureate Planning, Life Care Planning, Medi-Cal Benefits, News, Probate / Conservatorship, Revocable Living Trusts, Special Needs Trusts, Trust Administration, Veteran Benefits
Tags: , Administration, Estates, Healthcare, Planning
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3/10/2010 @ 6:58:PM By Moynihan_Lyons
Maureen just returned from the joint meeting of Northern & Southern California chapters of the National Academy of Elder Law Attorneys in San Jose. A great group of colleagues shared a wealth of valuable information. Thanks to all. In particular, thanks to Julie Fiedler of San Ramon for spearheading the efforts.
Posted Under: Care Coordination, Comprehensive Estate Planning, Estate Administration, Estate Planning, IRA Retirement Trusts, Laureate Planning, Life Care Planning, Medi-Cal Benefits, News, Probate / Conservatorship, Revocable Living Trusts, Special Needs Trusts, Trust Administration, Veteran Benefits
Tags: , Administration, Estates, NAELA, Planning
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