Orlando Estate & Elder Law

Common Sense Victory for People with Special Needs

Special needs trusts are an invaluable benefit for people with special needs and their families, since they allow for the ownership of assets without a loss of needed benefits. An unfairness in the law allowing the trusts has now been corrected.

Many people with special needs rely on government benefits for their day-to-day care. Without those benefits, they could not survive for long. However, having access to property and other assets can make one ineligible for many government benefits, which at one time meant that people with special needs had to be paupers and not own property.

To address that problem, special needs trusts were created.

A parent, grandparent, guardian or a court could create a trust for the person with special needs. If done properly, that would not make them ineligible for government benefits. However, people with special needs were not allowed to create the trusts for themselves. The law assumed that everyone with special needs lacked the mental capacity to create a trust.

This was the subject of a recent article in the Wills, Trusts & Estates Prof Blog titled "The Special Needs Trust Fairness Act Has Passed."

Both the House and the Senate voted to pass the Special Needs Fairness Act, which gives the ability for people with special needs to create their own trusts for themselves. On Dec. 13, 2016, President Obama signed this into law when he signed a larger piece of health care legislation.

Special needs trusts still need to be set up carefully, so people with special needs should seek expert assistance to set up their own.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 7, 2016) "The Special Needs Trust Fairness Act Has Passed."

Special Needs Trust Management Requires Special Skills

Special needs trusts can be difficult to manage and it can also be difficult to find professionals willing to take on the job.

Special needs trusts are an essential estate planning tool for parents of children with special needs. If set up and managed properly, the trusts allow the person with special needs to inherit assets from their parents without putting their eligibility for federal benefits in jeopardy. However, these trusts need to be managed properly to receive the benefits so normally professional trustees are hired for the job.

Unfortunately, professionals are increasingly unwilling to do so as Wealth Management reports in "Corporate Fiduciaries Are Shying Away From Special Needs Trusts."

The reasons for this are:

• Special needs trusts have been increasingly subject to more regulations and litigation. That makes it more difficult to manage the trusts and more likely that the trustees will be held liable for mismanagement.
• Special needs trusts are often seen as time-consuming to manage, which makes it more difficult for professionals to profit from them.
• Many professionals do not have the expertise to properly manage the trusts and they would prefer not to learn on the job. They decline the assignments.
• Many professionals just do not have the time or resources to take on special needs trusts. They are too busy with other trusts that are easier to handle.

If you are considering a special needs trust, make sure you ask your attorney about professionals in your area who will handle the trustee duties and who have the expertise to do so.

For more information about estate planning and special needs planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Wealth Management (Nov. 15, 2016) "Corporate Fiduciaries Are Shying Away From Special Needs Trusts."

Planning for a Child with Special Needs

Under the best of circumstances Americans often still have difficulty planning for their retirements. It is especially difficult for parents of children with special needs.

When parents of children with special needs start planning for their own retirements they also have to plan for how their children will be taken care of after they pass away. Most understand intuitively that they will need to save more money than their peers because they need to ensure sufficient assets are left to take care of their children.

What many do not know is that they need to be careful about how those assets are going to be left for their child with special needs. This topic was the subject of a recent Market Watch article entitled “Parents of special needs children plan for two futures.”

There are two major legal vehicles parents will want to know about and consider taking advantage of:

• Special Needs Trusts – People with disabilities should not inherit assets outright as it could jeopardize their eligibility for government benefits. Instead a special needs trust should be created to hold assets for the benefit of the person with disabilities. These trusts must be created in a specific way, so the assistance of an estate planning attorney is necessary.
• ABLE Accounts – These accounts are not yet available, with the exception of in Ohio, but they will be very soon. These accounts will allow some people with disabilities to have assets in their own name and under their own control, with some restrictions. Parents should be able to set up these accounts for their children and take advantage of the annual gift tax exemption to fund the accounts. Different states will have different ABLE account systems, so parents should shop around and consult experts.

Did you know that my area of expertise as a Board Certified Specialist in Elder Law includes special needs planning?  Please schedule a consultation if I can be of assistance.

Reference: Market Watch (July 7, 2016) “Parents of special needs children plan for two futures.”

Special Planning for Special Needs

Families with members who have special needs that require continuing care have some estate planning options to make sure that care is provided fairly.

When an adult child has special needs that require the help and support of parents it is important to create an estate plan that makes sure that support is provided after the parents pass away. This requires an estate plan that provides for the child's monetary needs in a way that does not disqualify the child from receiving government benefits. It also often requires creating an estate plan that provides those funds in a way that is fair to other children.

Recently, the Wall Street Journal discussed a couple of tools to accomplish these goals in "Estate Planning When You Have a Special-Needs Child."

The tools include:

• Supplemental Needs Trust – These trusts allow parents to leave assets for the care of a child with special needs, but leave those assets under the control of a trusted third-party who can make sure the assets are used appropriately and invested wisely. They also help prevent disqualification from receiving government benefits, which is often the result if a child with special needs is left a large inheritance in one lump-sum.
• Life Insurance – To fund a trust for a child with special needs, parents can take out life insurance policies and make the trust the beneficiaries of the policies. This allows the parents to divide their assets between all of their children equally while providing the extra funds for the child with special needs in a way that other children will not view as unfair.

These are only two of several options for providing for child with special needs in an estate plan.

It is critical to discuss your particular situation and about the other options that might be best for your family.  I would be happy to help with this important process.

Reference:  Wall Street Journal (March 27, 2016) "Estate Planning When You Have a Special-Needs Child."

ABLE Act - Special Needs Replacement or Addition?

 Families with children with special needs often have to make extraordinary efforts in their estate plans to make sure that the children are still cared for after the parents pass away. The ABLE Act makes that less necessary.

Everyone who has a child with special needs knows that it takes a lot more money to care for the child. And it certainly takes much more than is covered by monthly Supplemental Security Insurance payments.

This has long created an issue for these parents as they worry about what will happen to their child if the parents pass away.

Parents could not just leave money to the child in their estate plans because that could make the child ineligible to receive SSI. Instead, special needs trusts had to be created by the parents. These were often less than ideal as they could only be created by a parent and required a trustee other than the disabled person to handle the money.

The Achieving a Better Life Experience Act seeks to make things easier.

Recently, the Centre Daily Times reviewed the basics of the Act in "Elder law: Understanding the ABLE Act."

These specifics include:

• A person who became disabled prior to the age of 26 can create and maintain the account for him or herself.
• Funds in the account are not used to determine SSI eligibility as long as they are less than $100,000.
• Account income is not subject to income tax.
• Funds must be used for qualified disability expenses.
• When the account holder passes away, account assets must be used to pay back the government for benefits received unless they are rolled over into the account of a family member who is also disabled.

Please contact my office to learn about the restrictions on ABLE accounts, if they are adopted in Florida and whether a special needs trust would still be better for your family situation.

Reference: Centre Daily Times (Jan. 9, 2016) "Elder law: Understanding the ABLE Act."

One More Scary Halloween Story!

A Halloween riddle for you: What's scarier than ghosts and goblins to Americans 50 and older? Answer: Their finances.

That's the upshot of the latest Country Financial Security Index, and two other surveys I've seen lately back it up. In fact, there's a strong case to be made that many boomers have grown truly scared of investment risk as a result of what they experienced in the 2008-2009 financial crisis and market crash. The new survey of 1,000 adults from Country — a group of insurance and financial service companies — found that 81% of people 50+ have at least one financial fear. What spooks them most: being able to afford health care expenses and being able to retire comfortably. Women 50 and older were more likely than men to worry about being able to retire comfortably, 34% (men) vs. 39% (women) cited this as a fear.

Forbes recently published an article, "What Spooks Us Most About Money," in which they reported that health care expenses are the biggest fear among Americans 65 and older, according to the survey. Compare that to the top worry of Millennials, which is affording their rent or mortgage.

But here's the scariest part of the survey: about 21% of the 50+ respondents said their financial fears are holding them back from reaching their goals. That's gotta give you some estate planning chills! Many people 50+ are also undoubtedly scared of what will happen to their financial assets after they die and whether their loved ones will receive proper care.

The whole subject of estate planning gives some people the willies. It is scary to think about dying and planning for what may happen after your death. But not thinking about it could wind up haunting your family for years to come.

If you fail to name guardians for your children in your will, the court might name them for you. And if you don't have a written estate plan, your wealth could go to heirs you hardly know or do not want to have an inheritance.

Sit down with a qualified estate planning attorney and have him or her draw up a will or trust, if you haven't done so already. Ask if it would be wise for you to have one or more trusts, which can be extremely helpful if you have children or grandchildren with special needs.

Please call for a consultation and we can deal with those fears one step at a time.

Reference: Forbes (October 30, 2015) "What Spooks Us Most About Money"

Which Type of Trust is Right for Me?

Trusts can be a great way to update an estate plan, whether within a will or as a separate estate-planning tool. Trusts have a reputation for being something that most people don't have to worry about, with most seeing a trust as a vehicle for the ultra-rich to protect their assets from taxes and other financial threats. In reality, though, trusts are tools that just about anyone can use to achieve worthwhile financial goals. Still, the legal complexity of the estate planning world has left many people uncertain about what a trust is, let alone how to use it. Let's take a closer look at trusts to try to answer the question of what they are and how they can help you and your family.

In “What Is a Trust, and Why Should I Have One?” Fox Business explains that in legal terms, a trust lets an individual separate the legal ownership of property from the beneficial enjoyment of that property. A trust places the responsibility for managing and preserving trust property on an individual or entity (“the trustee”). The beneficiaries receive the trust assets based on the terms of the trust. There are many trusts available to serve many different goals. The article discusses some of these trusts and how people use them.

Revocable trusts are also known as living trusts. The creators of this trust can ensure the proper management of their assets during their lifetime and after they pass. A revocable trust can be changed at any time by the creator. However, instructions in the trust document tell the trustees how to act after the creator’s death. Revocable trusts are used in estate planning to pass assets to heirs in private and to avoid probate, which can reduce costs and stress.

Testamentary trusts. These are created in a person's will and they don't keep the assets out of probate. A court proceeding is required to fund the testamentary trust. Testamentary trusts provide flexibility.

Irrevocable trusts can be used to make gifts that allow subsequent protection from creditors and estate taxation. These trusts are typically created to hold high-value life insurance policies and keep the insurance proceeds out of the taxable estate of the insured person. The trust language can state that any trust money used for the beneficiary won't run into issues with Medicaid and Supplemental Security Income.

Charitable trusts, as the name implies, allows an individual to make a gift to charity but retain an interest in the donated property. Charitable remainder trusts will let you keep an income stream that continues for a specific time or for the rest of your life—the charity will receive any remaining funds at your death. These trusts provide income tax benefits from the value of the donation, even though you still receive income from the trust assets.

Other trusts are used for estate planning purposes, such as credit shelter trusts. These are used to preserve the estate tax exemption of a deceased spouse for future use. A Qualified Terminable Interest Property trust, or QTIP, gives a spouse access to funds while preserving their eventual distribution to children or other heirs. Finally, a Qualified Personal Residence Trust, or QPRT, lets you transfer an interest in your home to family members while you are still alive in a way that reduces gift and estate taxes.

All of these trusts have the same benefit: guaranteeing that your assets will be used to meet your wishes and provide income for you and your loved ones. If you still have questions or are just curious, consider a consultation to see if you can benefit from establishing a trust for yourself or your family.

Reference: Fox Business (September 7, 2015) “What Is a Trust, and Why Should I Have One?”

Nine Times To Update Your Estate

Updating your estate plan isn't something you think about too often. Why should it be? You're happy, healthy, and you have a good life. Letting the negative "what ifs" creep in only puts a damper on your day. As painful as it is to consider, estate plans are critical. If anything happens to you, it's important to know your loved ones are taken care of and your wishes are honored. Throughout life, those last wishes change with the major events you go through.

The Huffington Post recently posted an article titled “9 Life Changes That Require An Estate Plan Review.” These life changes, if nothing else, signal when you should update your estate plan.

Marriage. Did you know that your spouse may not be the sole beneficiary or heir of your estate?Depending on where you live at the time of your death, this may be unknown without a solid estate plan. To ensure your spouse, or anyone else gets certain belongings from your estate, you need to detail this in your plan. When you wed, you should review your estate plan and make any necessary adjustments.

Remarriage. A marriage license typically doesn’t set up your new spouse to receive your entire estate after your pass away. The laws of most states say that your new spouse will share in your estate assets along with your children from your first (or previous) marriage unless you change this in your will, living trust, or other estate planning document. If you get remarried, it's critical that you update your estate plan to add your new spouse and any of his or her stepchildren should you want them to inherit from you.

Divorce. Typically when a divorce decree is entered, the laws automatically disinherit a former spouse. Nonetheless, if you included provisions in your estate plan that give specific property to your former spouse by name, make sure to change this to disinherit him or her.

Birth of a Child. This big change definitely qualifies for an update of your estate plan to protect your child or children. You need to nominate guardians to care for your children in case something happens to you. If not, your children will be cared for by guardians appointed by the court. That could be anyone. Same thing applies if you adopted a child. Designate a guardian to care for your child in your will.

Death of a Beneficiary. Updating your estate plan may be the furthest thing from your mind if this should occur. However, it's important. If your beneficiary dies, you will need to ensure your estate plan still does what you want, such as if the beneficiary had children and you want his or her portion to go to them. You’ll typically need to talk to your estate planning attorney to make sure that happens.

Illness or Disability. One often overlooked aspect of estate planning is illness or disability. There are lots of things to consider regarding your care, and you need to articulate your desires before you become ill, disabled, or incapacitated. This can save your loved ones heartache. In addition, you need to think about the situation if you passed away and one of your beneficiaries became incapacitated. Money from your estate could actually harm them by causing him or her to be ineligible for needs-based government care programs. You need to look at a special needs trust. Plan for both of these scenarios by updating your estate plan before anything happens.

A Substantial Increase in Assets or Income. If you have more money or assets now than when you first created your estate plan, then that is a good thing up to a point. That point is when you and your beneficiaries are subject to federal or state estate taxes. Your estate planning attorney can structure your estate to minimize these taxes and keep more money for your estate.

Moving to Another State. Every state has its own unique set of estate laws, so you should talk to your estate planning attorney.

Changes in the Law. State and federal tax and estate laws are always changing. When this occurs, your estate plan may be at risk.

Review your plan with your attorney to make sure everything is OK.  If you don't have a qualified estate planning or elder law attorney, please consider seeing me for a review.

Reference: The Huffington Post (August 17, 2015) “9 Life Changes That Require An Estate Plan Review”

Are Trusts Always a Good Idea?

To some estate planning attorneys, trusts are the default option. Their wealthy clients generally pass assets to heirs that way. Trusts can keep inherited wealth safe; assets left outright to individuals may be vulnerable to estate tax and divorce and creditors and scam artists. That said, trusts might not always be the best choice for wealth transfer. "I agree with the use of trusts, when appropriate, for significant asset inheritances," says Gil Armour, a financial advisor with SagePoint Financial in San Diego. "However, I have always been a fan of simplicity. An outright inheritance to an individual is much quicker, simpler, and doesn't require ongoing trust tax returns. Virtually every one of my clients has specified individuals as the primary beneficiary for their retirement accounts. They are confident that their spouse or adult child will manage the assets in a responsible fashion."

The website financialplanning.com posted a recent article, titled “Should Estate Plans Rely on Trusts?”, which explains that some folks use a living trust as a contingent beneficiary, typically when there are minor children. The trust will assign a guardian for the children until they are older. There are several reasons for using a trust as an estate planning tool, rather just using a will. Assets held in trust avoid probate at death, which is important in situations with property in multiple states. If a person passes away with property in a few states, probate in each state might be mandated.

Implementing a trust provides control for assets in the event of incapacity. A co-trustee or successor trustee will take over the management of the trust assets. Another nice thing about a trust is that it gives you maximum privacy, where a will is public record and open to all.

Trust language can be drafted to reduce or eliminate estate taxes, as well as to protect from divorce settlements and creditors. In addition, a trust can protect dependents with special needs. Ask your estate planning attorney about a special needs trust for your child with special needs—or about the other types of trusts that might benefit your circumstances.

An individual can use trusts in one of two ways. Some people will grant title assets to a trust while alive, and then the living trust terms will stipulate the distribution of trust assets at the grantor’s death. Other folks don’t have a standalone living trust; instead, they use a testamentary trust which is funded through a will.

Please set up a consultation and we can help you decide which way is right for you.

Reference: financialplanning.com (August 13, 2015)“Should Estate Plans Rely on Trusts?”