Tuesday, June 28, 2016

Planning to Protect Children with Special Needs

We've previously addressed how estate planning can be used to protect minor children in the event of unexpected events. For those parents whose children have special needs this planning is even more important, as it can impact eligibility for programs that assist their children with their day to day lives. Thankfully it is possible to protect children with special needs and maintain their eligibility for such programs through the use of a Supplemental Needs Trust.

The birth of a special needs child changes the lives of a family dramatically. In addition to the lifelong challenges, parents must also plan for the child’s care and well-being in the event of their deaths or inability to care for their child. It is important for parents address these issues in their estate planning, failure to do so can have serious implications for their child’s future care.
A supplemental needs trust, also known as a special needs trust, can be an important planning tool for parents of children who are likely to need special care and support for their entire lives. A supplemental needs trust protects assets for the benefit of a special needs child without jeopardizing eligibility for means tested benefits such as Medicaid, Medicare, and Supplemental Security Income. If properly drafted, assets in supplemental needs trusts do not count toward eligibility calculations for these and other potential benefits.
As indicated by the name, supplemental needs trust assets can be used to supplement governmental benefits by paying for care and items that are not covered under those programs. Funds can also be used for enrichment purposes, such as costs of visiting family members, specialized education programs, and allowing the child to live in the similar manner as when the parents are alive.
While a supplemental needs trust can be established at any time, parents risk not providing protection to their special needs child in the event of an untimely death prior to completing appropriate estate planning. The supplemental needs trust can be funded immediately with discretionary assets or funded with assets from a parent’s Living or Revocable Trust at death. A supplemental needs trust is not only for wealthy families with significant assets, but also for others who may not currently have significant assets but still have a desire to protect their child. Often a supplemental needs trust is funded with a life insurance policy so that funds are available for use for the child on the death of parents. By working with a qualified financial planner and/or insurance professional, a parent can determine the type of policy and amount that best protects their child.
Once parents establish a supplemental needs trust it is important to inform grandparents and other family members of the existence of the trust so that funds otherwise available or to be given to the child can be directed into the trust for the benefit of the child rather than to the child directly, avoid a potential error that would interfere with government benefit eligibility.
It is important to remember that protecting special needs children is more than simply setting up a trust for their benefit. Another important aspect of this planning is the need to choose the correct trustee to administer the trust. Parents should try to pick a trustee who knows the child and knows and supports their wishes for the child's benefit. Often the trustee is a family member who knows the child well and is able not only to communicate with them but also use the trust assets to provide an appropriate lifestyle. Parents will often spell out their wishes for the child's in a separate letter, giving the trustee a better idea of their wishes for their child.
The rules for government benefits are complex and therefore parents should consult with an attorney knowledgeable with not only those rules and also supplemental needs trusts in order to ensure that any planning provides the maximum protection for their children.
Alan and Matt

Monday, June 20, 2016

Estate Planning Really is For Everyone

It has been a long time since we last posted anything new here, but after seeing a number of different articles in the news media and other publications we felt that it was time for us to come back and revisit some important issues in estate planning and to discuss some of the changes to the area that have transpired over the past two years. We look forward to hearing from our readers if there are particular questions you or your clients have had about estate planning, because as always one of our major goals is to make the process of estate planning approachable and understandable.
We'll start off with a subject that both of us constantly attempt to help people understand, the question of "Who needs an estate plan?".

Estate planning is not just for older, wealthier individuals. Estate planning covers a number of areas that can be of great benefit to a person of any age. While often estate planning is associated with planning for one's eventual death and the transfer of property to loved ones, estate planning is much more than that.
A person of any age, whether or not owning significant assets, can benefit by writing a Will. Estimates vary, but surveys regularly indicate that less than 50% of adults have a Will and even fewer have documents protecting them in the event of a disability. 
A Will is a basic estate planning document that can provide specific instructions about how your property is to be distributed. But if you have minor children, a Will is important because it will designate your choice for Guardians to take care of the physical well-being of your children in the event of a premature death. The Will also name a Personal Representative (sometimes called an Executor) to administer your estate for the benefit of the beneficiaries you have named. While it will not eliminate the probate process under state law, a Will at least allows you to designate your beneficiaries rather than allowing a complicated state statute to determine how your assets are distributed. For example, the Michigan intestacy statute provides for six different potential distributions to a surviving spouse and an additional four potential distributions to other beneficiaries, all dependent on who survives the decedent. Based on the complexity of these rules, it is easy to see that failure to specifically designate those beneficiaries who are to receive your assets can result in unintended and undesirable results. For some people, especially younger adults, it may be even more important to consider documents protecting you in the event of disability rather than death.
A Patient Advocate Designation (PAD) is a document that allows you to specify the person or persons you want to make medical decisions on your behalf in the event you become disabled and unable to make your own medical decisions because of illness or accident. If a PAD has not been executed and a person becomes incapacitated through illness or accident, someone must file a petition with the local Probate Court to have a person appointed to make medical decisions. This process is time-consuming costly and public.
A Durable Power Of Attorney (PoA) is a document that allows you to specify the person or persons you want to make legal decisions on your behalf in the event you become disabled and unable to make your own legal decisions because of illness or accident. If a PoA has not been executed and a person becomes incapacitated through illness or accident, someone must also file a petition with the local Probate Court to have a person appointed to make legal decisions. Again, the process is time-consuming costly and public.
You may also want to consider a Living Will which, although nonbinding, is an expression of your intent that you do not want to be kept alive by extreme measures if doctors indicate that such measures will only prolong the dying process rather than lead to a recovery. This document and allow those designated to more quickly make medical decisions you would want if you could make them.
While these documents are applicable for all adults, parents with children who have reached age 18 and perhaps going off to college or another state for job opportunities may want to have these children execute a PAD or PoA, because otherwise medical personnel will likely not allow parents to make decisions on behalf of their adult children.
While there are other estate planning documents that are beneficial as an estate gets more complex, the documents discussed here are the basics which are important for all people. To ensure that you have planning that is appropriate for your needs please consult with an experienced estate planning attorney.

Alan and Matt