Legacy Assurance Plan: special needs estate planning

Thursday, October 26, 2017

Incorporating Both Your Children With -- and Without -- Special Needs into Your Estate Plan Asset Distribution

Summary: Estate planning is very important if you’re a parent of minor children. It is still extremely vital even after all your children pass their 18^th birthdays, especially if you have a child or children with special needs. With careful and detailed planning, you can feel confident that you’ve done all you can to provide fully and fairly for all your kids, and that you’ve done all you can protect your child with special needs from a loss of vital benefits as a result of an improper direct receipt of an inheritance.

If you are a parent, especially if you’re the parent of more than one child, chances are you very familiar with having heard, “That’s not fair!” There are many situations in which you may have heard that familiar refrain, but definitely one circumstance is when a child thinks she has received an insufficiently large share of something as opposed to their siblings. Even in estate planning, many parents strive to ensure that they play “fair,” working to create a plan that leaves an equal amount of wealth to each of their children.

This is an understandable, and even noble, goal. If, however, you have among your children some with special needs and some without, then achieving this objective can be substantially more complicated, and can sometimes lead you into bad decisions if you do not plan carefully.

Many parents of children with special needs are familiar with the legal concept of a “special needs trust” (sometimes alternately known as a “supplemental needs trust (SNT).”) If your child with special needs receives need-based governmental benefits, then it is important to ensure that any inheritance you leave for that child does not transfer directly into her name (and cause her to lose eligibility for her needed benefits.) The SNT is a way to do that.

So, if you have two children (one with special needs and one without,) then dividing your assets could be as simple as splitting your assets between your child without special needs and the SNT of your child with special needs, right? Possibly, but proper planning may still be complicated than that. The optimal way to plan to leave a legacy for your children, and leave them the largest one possible, may depend on what type of assets you possess. For example, assume that you own a traditional IRA. Leaving that asset to your special needs child’s SNT could trigger a much higher tax bill than leaving it to your child without special needs. On the other hand, there are other assets, like non-retirement CDs, that may be able to provide a benefit to your child with special needs without causing such a damaging tax ramification. Therefore, maximizing your distributions to your kids may involve leaving all of one asset to one child and all of another to another’s SNT, as opposed to giving 50% of each asset to each side.

Ultimately, the keys are to make sure that you get that SNT put into effect and that you ensure that whatever assets you desire to go to into it are funded in the proper fashion. Additionally, just like with any asset with a death beneficiary designation, take care to give your retirement assets, along with your entire estate plan, periodic “check-ups” to make sure that your estate plan documents and your asset beneficiary designation paperwork remain “in synch” and optimized to carry out your goals exactly in the manner you want.

This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com.

This article written and published by:

Legacy Assurance Plan

8039 Cooper Creek Blvd

University Park, Florida 34201

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Thursday, June 15, 2017

The Importance of Dotting All Your I’s and Crossing All Your T’s When Your Legacy Includes a Beneficiary With Special Needs

Summary: When you have a loved one with special needs whom you desire to include in your estate plan, you have many essential steps you should take in creating and maintaining your plan. Establishing and funding a “Special Needs Trusts” or “Supplemental Needs Trusts” may be an important part of achieving this element of your legacy. But protecting your loved one with special needs goes beyond that. Proper planning also means looking at, and periodically reviewing, your entire estate, including non-probate assets, in order to ensure that there are no components in your estate (and estate plan) that could cause problems for your loved one and frustrate the goals you were trying to accomplish.

One of the groups of people who have one of greatest needs for engaging in careful and comprehensive estate planning is people who have one or more beneficiaries who have special needs. For these people, proper planning is vital because, in many cases, the beneficiaries with special needs whom they desire to include in their legacy receive essential services through governmental programs that have needs-based eligibility requirements. One wrong step could mean an event that triggers your loved one’s disqualification and a loss of those services. Even if it is only temporary, such a loss could be very harmful.

If you have a loved one with special needs whom you desire to include in your estate plan, you may already have heard about “Special Needs Trusts” or “Supplemental Needs Trusts” (SNTs.) This variety of trust planning can be very helpful because it allows you to provide a distribution for the benefit of your loved one with special needs without doing it in a way that potentially jeopardizes their continued eligibility for their government program-based benefits and services. This type of trust planning allows you to take the money to you would have left to this beneficiary and place in it an irrevocable trust for the benefit of that person. A person (not the beneficiary) whom you name then serves as the trustee of the trust, manages all of its funds and makes all decisions.

Most people’s estates go beyond just what is subject to their probate estate or living trust, however. This is why proper planning for your special needs family goes beyond just establishing a special needs trust. For example, what about your life insurance, annuities, IRAs, other investment products…. or, for that matter, any account that has a pay-on-death or transfer-on-death designation attached to it?

Have you made sure that all of these accounts’ death beneficiary designations are constructed properly? For example, let’s say you have two children: a son with special needs and a daughter who doesn’t have special needs. You have a SNT for your son. You may have set it up and funded it properly, but if your IRA’s death beneficiary designation says, “To Son and Daughter equally as co-beneficiaries,” your son could still have an eligibility requirement when you die. This is another excellent reason why estate plan reviews -- reviews that are genuinely comprehensive and look at all of your estate -- can potentially do so much good. Maybe you’ve set up a new financial account, or maybe you just moved from one account provider to another. Are you certain that all of your death beneficiary designations are constructed properly? A thorough review is as vital a part of planning for your special needs family as is creating a SNT.