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The information in this guide should not be considered legal advice. While we strive to provide as detailed, reliable and understandable legal information as possible in our Special Needs Guides, they cannot substitute for an attorney applying the law and years of experience to a particular client situation. We urge readers to use the Guides as background material and to consult with one of our members before taking action.
10 Mistakes in Special Needs Planning
When Planning for a Loved One with Special Needs
The most popular estate plan in the Unites States is doing nothing. While not a good idea for anyone, it is particularly troubling when there is a loved one with special needs. If someone does nothing and then dies or becomes incapacitated, his or her estate is managed under the rules set forth in his state’s probate code. The state probate code does NOT consider whether a loved one has special needs. This could cause the wrong person being named to manage your loved one’s care or could even cost your loved one access to essential public benefits. Doing nothing is not an option. Read More
Disinheriting the Loved One
Many families who have a loved one with special needs rely on SSI, Medicaid or other government benefits to provide food and shelter. To protect these benefits, you may have been advised to disinherit your loved one with special needs. This is never a good idea; this is the person who needs your help most! If there are no assets set aside for the loved one, he or she will depend on public benefits. Public benefits rarely provide more than welfare-level care. However, a well drafted third-party special needs trust provides legal protection for your loved one’s inheritance that can then be used to supplement the loved one’s public benefits.
Assuming Others Will Care for Your Loved One
Some people decide the best option is to not leave any assets to the loved one, but to leave them instead to someone else (usually a sibling) with the promise to care for the loved one. This plan is fraught with landmines. Even wellintentioned siblings have their own lives and financial concerns and may focus on their concerns rather than the loved one’s. Other issues also arise, such as when a person left the money divorces and the funds go to a spouse who has no interest in protecting the loved one. The sibling with the “extra share” may predecease the their sibling with disabilities or become incapacitated. His or her heirs may not care for your loved one as thoughtfully and completely as hoped. If the sibling loses a lawsuit, faces financial difficulties or has significant creditor problems, that child may resort to using funds intended for their loved one, or a court may require that sibling to turn that money over to the creditor. However, if you create a thirdparty special needs trust, you protect everyone. The trust will provide a way to leave clear and legally binding instructions to care for your loved one. It protects the assets you’ve set aside for your loved one’s care. When you provide clear instructions and a helpful structure, you lessen the burden on all and you support a loving relationship among them, which also protects your loved one with special needs. Read More
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Using a One-Size-Fits-All Special Needs Trust
While a special needs trust will provide legal protection for your loved one, some special needs trusts are unnecessarily inflexible and generic. Many trusts are off-the-shelf and not customized to the loved one’s needs. The trust may preserve government benefits, but does so by preventing the trustee from making distributions that could otherwise enhance the quality of life of the loved one. Many of these bare bones trusts have a distribution standard that prevents the trustee from making distributions that may reduce or eliminate public benefits. This prevents distributions that may be in the best interests of the beneficiary. Other attorneys make special needs trusts “irrevocable” upon signing. While this is sometimes appropriate, most people prefer a revocable trust to retain their right to improve and change the trust as the years pass. Over time, their loved one’s evolving needs can dictate the trust’s provisions, and -- just as important -- changes in the law can be reflected in the trust. The special needs trust must be flexible and personalized to your loved one’s needs.
Failing to Plan for More than Public Benefits
The main issue with one-size-fits-all special needs trusts is that the only goal is preserving public benefits. While preserving public benefits is important, it should not be the only goal. The special needs trust should be designed to enhance your loved one’s quality of life in all aspects. This can include financial planning for the life of a loved one, planning for where the loved one will live, planning for the persons who will provide advocacy, developing a lifetime management team, and developing a plan for proper caregiving. Special needs planning is not about the document; it is about making sure your loved one with special needs has the legal protections necessary to fully enhance his quality of life when you are no longer there to do so. Read More
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