Special Needs Planning

Planning For Incapacity and Long-Term Care

With people living longer due to advances in medicine and changes in lifestyle, odds are that most of us will become disabled for some time before we die and may need long-term care. Unfortunately, too few plan for an event that is more likely to be a probability than a possibility—and the consequences of not planning can be disastrous for all involved.

When someone owns assets in his/her name and becomes unable to manage financial affairs due to mental or physical incapacity, only a court appointee can sign for the disabled person. This is true even if the person has a will, because a will can only go into effect after death. With some assets, especially real estate, all owners must sign to sell or refinance. So, for example, if a married couple owns their assets jointly, one of them becomes disabled and an asset needs to be sold or refinanced, the well spouse will have to go through the probate court in order for that to happen.

Other necessary documents include:
* Durable Limited Power of Attorney
* Durable Power of Attorney for Heath Care
* HIPPA Affidavits

Planning for disability may also include disability income insurance (to help replace lost income), and long term care insurance (to help cover the costs of care that are not covered by medical insurance). Business owners may want to consider business or professional overhead insurance that will pay monthly operating expenses until they recover or the business can be sold or transferred, and buy-sell agreements in the event a co-owner becomes permanently disabled.

Disability before death is not always expected and it does not always happen, but it must be planned for.

As poet Robert Burns mused centuries ago, “The best-laid plans of mice and men often go awry.” Despite thoughtful effort and a concerted strategy, you cannot prepare for every emergency. A car accident, sudden illness, workplace injury or chronic medical condition can force you to re-evaluate the core assumptions you used to plan your future and set up your legacy.

A 2015 report published by the Centers for Disease Control and Prevention (CDC) offered this sobering assessment: “In 2013, approximately one in five U.S. adults reported any disability, with state-level prevalence of any disability ranging from 16.4% in Minnesota to 31.5% in Alabama.” The CDC also reported that “annual disability-associated health care expenditures were estimated at nearly $400 billion in 2006, with over half attributable to costs related to non-independent living (e.g., institutional care, personal care services).”

Frustratingly, you can’t turn back the clock. However, you can take meaningful actions to protect your legacy and estate in the wake of your newfound limitations. Here are some insights to that end:

Work with a qualified estate planning attorney to ensure that:

• There’s an authorized person to make financial and healthcare decisions for you if you become mentally or physically unable to do so yourself.

• There’s also an authorized person to manage your property, pay your bills, file your taxes and handle similar business if you’re unable to do these tasks.

• Your wishes about health care decisions, such as end of life care and do-not-resuscitate instructions, have been communicated in a legally valid and binding manner.

Get a recommendation from your estate planning attorney or your financial advisor, who can help you take additional actions, such as:

• Ensuring that you have appropriate insurance.

• Reassessing your investment options and portfolio in light of your new limitations and constraints on your ability to generate income.

• Making sure that you have a budget that works and that your bills will all get paid on time.

Mind this important distinction:

Be advised that “disability” for legal purposes is different than “disability” for financial planning purposes.

For example, disability for financial purposes might mean you can’t work gainfully anymore because of cancer or a workplace injury. On the other hand, “incapacity” in an estate planning context typically means that a person is no longer capable of making sound decisions, often due to systemic illness or injury.

In other words, you can be “disabled” for financial/insurance purposes and be non-disabled for legal purposes. However, almost anyone who is disabled for legal purposes would also be considered disabled for financial purposes.

Either way, it’s important for us to work together with your financial advisor to make sure you and your family are fully protected.

Take these actions on your own:

• Pay attention to where your money is going as well as to your long term planning strategy. Your estate planning attorney can help you assess whether your current plans are still realistic and, if not, what alternative options you have.

• Maintain a healthy lifestyle. For instance, cut down on added sugars and refined vegetable oils and be sure to eat enough vegetables, protein, and healthy fats.

• Get the help you need from trusted professionals. Now is the time to tap your friends and family and network for assistance with the heavy lifting. No single advisor will have all the answers. But your team can work in concert to reduce the anxiety and uncertainty and keep you focused on what really matters.

Please reach out to us to assess your long term plans and documents and make sure you are as secure as possible in light of your new challenges.

Important Steps to Protect Your Special Beneficiaries

1. Have a Special/Supplemental Needs Trust Prepared

One of the first things you can do in your estate planning is establish a special or supplemental needs trust (SNT) for the benefit of your child or grandchild. An SNT is a special type of trust designed to set aside money and property for the benefit of a beneficiary who may qualify for public assistance for medical and other care expenses as a result of his or her disabilities. This type of trust can be added to an existing trust, or it can be drafted as a standalone trust.

Because most government programs providing aid to disabled individuals have strict requirements about how much money and property a person can own and how much money they can receive on a regular basis, it is important to make sure that any inheritance your special needs child or grandchild receives is structured in a way that will not disqualify them from receiving the government benefits. Even if your child or grandchild is not currently receiving government benefits, this does not mean that they will never receive them. When planning for their future, we want to make sure that we are maximizing all opportunities available to them, not limiting those opportunities. To accomplish this, it is crucial that the trust be carefully drafted by an attorney who is familiar with the eligibility requirements for government benefits.

In addition to providing for your child’s or grandchild’s financial future, an SNT allows you to appoint a care manager or an advisory committee. As opposed to a trustee, whose job is to manage the money and property in the trust and make distributions, the care manager acts as your child’s or grandchild’s advocate. Depending upon the level of care your child or grandchild needs, the care manager may only need to check on them periodically or may be responsible for their day-to-day care. For those needing more assistance, the care manager may also serve as part of an advisory committee made up of multiple friends, family, and/or professionals. As an advocate, the care manager or advisory committee can advise the trustee about the beneficiary’s needs and the best ways to use the funds.

Within the SNT, a statement of intent can be included to instruct the trustee, and if necessary, the court, as to why the trust was established and how the money and property should be used. Although your intentions may seem obvious, including this section in the SNT can act as a safety net should there be a change in the law causing the special needs beneficiary to become ineligible for government benefits. If you include a statement of intent, it can be easier to change the trust to ensure that your original objective is carried out after you have passed away in the event of unforeseen changes.

2. Write Down Your Instructions

In addition to creating an SNT, writing a letter or memorandum of intent can provide excellent instructions to the trustee you choose about what is to happen after you have passed. Although this document is not legally binding, it can give your trustee insight into your true intentions. You can include instructions regarding the types of things you want the money to be used for (so long as they are allowable under the various government rules), milestones you would like to see the beneficiary achieve, and the standard of living you would like the beneficiary to have.

3. Consider Life Insurance to Provide the Necessary Funds

Supporting a special needs child or grandchild can be expensive. While you are working or have a stream of income, you can allocate money as you see fit. However, not everyone has enough of a nest egg to continue covering these expenses for their special needs child or grandchild once they have passed away. By purchasing life insurance and naming the SNT as the beneficiary, you can guarantee that there will be sufficient money at the trustee’s disposal to care for your child or grandchild. Life insurance can be an attractive option because it is paid out as a lump sum and does not have the same income tax liabilities as retirement accounts.

4. Review Your Retirement Accounts

With the passage of the SECURE Act, most beneficiaries lost the ability to stretch distributions from an inherited IRA over their life expectancies. However, Congress created a new class of beneficiaries called “eligible designated beneficiaries,” which includes disabled beneficiaries. These beneficiaries retain the ability to receive distributions over their life expectancies, reducing the amount of income tax due when those distributions are made. Congress also passed additional rules allowing the disabled beneficiary’s life expectancy to be used for certain types of trusts. If you have a large retirement account, it is very important that we meet to discuss ways this money can be distributed after your death to maximize its benefits to all of your beneficiaries.

5. Give Us a Call

Ensuring that your special needs child or grandchild is cared for after you are gone is likely a top priority for you. Our priority is to assist you in crafting a plan that will ensure continued support and prosperity for your loved ones. Call us today to schedule your appointment.

Caregivers, You’re Not Planning Just for Yourself

As a caregiver, you spend much of your time, money, and energy taking care of the needs of others. Those who have taken on the role of caregivers for ill or disabled spouses, aging parents, children, or other loved ones with special needs are typically selfless and giving individuals who may not stop to consider their own needs.

Your job is invaluable, but it may exact a heavy toll if you do not seek out the help of others. We want you to know that you are not alone: There are resources available that can make your job as a caregiver easier. It is important to seek out the emotional support of others, either family members or other caregivers, who can understand and empathize with both the rewards and the physical, emotional, and financial burdens associated with caregiving. There are also programs that provide respite care or adult daycare that can allow you to take a much-needed and well-deserved break. State or federal aid and tax credits or deductions may be available to help ease your financial burden as well.

Care for Yourself and Your Loved Ones by Creating an Estate Plan

As your estate planning attorneys, we are another resource you can look to for support. If you are caring for aging parents or other family members with disabilities, it is essential to ensure that you not only address your own emotional and financial health, but that you have an estate plan in place that addresses both your needs and the needs of those you care for. We can provide you with the peace of mind that comes from knowing not only that a plan is in place for your future, but also the future of the loved one under your care. Knowing that your loved one will continue to receive loving care, even if something happens to prevent you from continuing to acting in the role of caregiver, will help ease any concerns you have about your loved one’s care.

Name a Guardian

If you are a parent who is acting as a caregiver for a special needs child, you should name a guardian—and more than one alternative—in your will to serve in the role of physical caregiver if you pass away or are no longer able to care for your child. Otherwise, the decision about who will act as a guardian will be left to the court, which may not reflect your wishes.

If the care recipient is an adult, you must ask a court to name you as your loved one’s guardian and/or conservator to be able to make decisions about their health care, living arrangements, and finances. If you are providing day-to-day care, you may want another trusted person who can handle your care recipient’s financial matters to act as conservator.

What happens if you are no longer able to act in the role of guardian for your adult care recipient? State law varies regarding the designation or appointment of a successor guardian for an adult. Some states allow a standby guardian to be appointed at the same time the first caregiver is appointed or to be designated in the initial guardian’s will or in another written document, as long as it is properly witnessed. If anything happens to you, the standby guardian can immediately step in to begin providing care. Some states allow a standby guardian to serve for a brief time but require approval by a court before being appointed as the permanent guardian. Still, other states have laws enabling the court to consider an individual you nominate in your will as a successor guardian when the court is making the decision about who is the best person to take on that role. We can help you determine the best course available for you.

Consider a Special Needs Trust

A will alone is unlikely to adequately address the needs of your care recipient. If you leave money outright to the person for whom you are caring or to another caregiver, it could be spent in a way that is contrary to your wishes, and will now be vulnerable to creditors of the recipient. In addition, it could make your loved one ineligible for government benefits or aid.

A special needs trust is an estate planning tool that may be very beneficial for your care recipient. A special needs trust can help preserve the beneficiary’s eligibility for government benefits, name a well-qualified trustee to manage the trust funds, designate a care manager, and preserve your loved one’s quality of life. Along with your financial advisor, we can help determine which of your resources can be used to fund the special needs trust or if a life insurance policy may be needed to ensure that there are sufficient funds available to provide for the beneficiary’s care. We can help you create a trust that sets aside, protects, effectively manages, and distributes assets for your care recipient’s lifetime, and equally important, designates a trusted individual to act as an advocate for your loved one if you cannot.

We Are Here for You

It is important not only to recognize your own emotional needs and develop the skills needed to deal with the stresses of caregiving, but also to reach out for help when you need it. As a caregiver, it is crucial to ensure not only that your own future is secure, but to also create plans that provide for your family and care recipient if something should happen to you. Take the time to create an estate plan, or if you have a plan in place, to reevaluate it at regular intervals to address changing life circumstances and laws. Please call us today to set up a meeting. We can help put your mind at ease by designing a plan that provides security for you, your family, and your care recipient.

If you have a loved one with disabilities, you may be familiar with “ABLE” accounts, authorized by Congress in 2014 under the Achieving a Better Life Experience Act. ABLE accounts are tax-advantaged savings accounts–similar to 529 education savings plans–whose funds can be used to pay for certain qualifying expenses of disabled individuals. As a result of the Tax Cuts and Jobs Act (TCJA), there are several changes that affect ABLE accounts.

What You Should Know

First, a 529 account can now be rolled over to an ABLE account. However, the ABLE account must be for the same beneficiary as the 529 account or for a member of the same family. Previously, families who originally funded a 529 account for a child whose disability manifested later in life would suffer a tax penalty if the funds were withdrawn from the 529 account to cover medical expenses because they were not allowable education expenses. Now those same funds, through the use of the rollover, can be made available for the beneficiary’s disability-related expenses. There are limits as to how much can be rolled over, so it is important to discuss any changes to a 529 plan with your tax professional.

Second, a beneficiary of an ABLE account can now contribute their personal earned income into their own account. The maximum amount a beneficiary can contribute is equal to the annual federal poverty level for a one-person home ($12,490.00 in 2019 in the continental United States and the District of Columbia). These contributions, however, are separate and apart from contributions made to the ABLE account by other individuals (family members, friends, estates, trusts, etc.). Further, a working beneficiary will not be eligible to contribute their own money to the ABLE account if their employer contributes to a workplace retirement plan on his or her behalf.

Third, those beneficiaries who contribute to their own ABLE account, as opposed to others who contribute to the account, may be eligible for the Saver’s Credit. Up to $2,000 of the contributions made by ABLE account beneficiaries may be eligible for this credit. This may help lower any income tax owed by the beneficiary or help increase any refund the beneficiary may be entitled to. There are, however, additional requirements that need to be met and it is important to check with an experienced professional to determine what credits may be available for a beneficiary who contributes to their own account.

Know Your Options

It is important to know that ABLE accounts, as well as special needs trusts, have an underlying purpose: to supplement, not replace, the benefits and services provided by government programs like Medicaid and Supplemental Security Income (SSI). If you have a loved one with special needs, contact us to help guide you through the process of creating a plan that best suits your family’s needs.

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