Every child is a precious gift, and as parents or grandparents, we strive to plan for their future, anticipating their needs and aspirations. However, families with special needs children or grandchildren face additional responsibilities in ensuring their loved one's future is secure, fulfilling, and supported. To ensure a flourishing future for your special needs child or grandchild, estate planning measures focused on their unique circumstances are essential. We recommend the following steps:
When it comes to estate planning, creating a Special or Supplemental Needs Trust (SNT) for your special needs child or grandchild should be a top priority. An SNT is a specialized trust designed to set aside funds and assets for the benefit of a beneficiary who may qualify for public assistance due to their disabilities. It can be established as a standalone trust or added to your existing trust.
It's important to note that government programs providing aid to disabled individuals have strict criteria regarding the amount of money and property a person can own while receiving benefits. Structuring any inheritance your special needs beneficiary may receive in a way that doesn't disqualify them from obtaining government benefits is crucial. Even if they are not currently receiving government benefits, considering the possibility of future needs is essential. To ensure all opportunities are available, it is vital that the trust is meticulously drafted by a lawyer well-versed in the eligibility requirements for government benefits.
An SNT not only provides financial security but also allows you to appoint a care manager or advisory committee. The care manager serves as an advocate for your special needs beneficiary, overseeing their well-being periodically or daily, depending on their level of care requirements. An advisory committee, comprising family members, friends, and professionals, can provide guidance to the trustee on the beneficiary's needs and the best use of the funds.
Additionally, the SNT can include a statement of intent, outlining the trust's purpose and how the funds should be utilized. This section acts as a safety net in case changes in the law make the beneficiary ineligible for government benefits. It allows for modifications to ensure your original intentions are met, even in the face of unforeseen circumstances.
In addition to establishing an SNT, putting your instructions in writing is crucial to ensure your wishes are carried out as intended. Consider creating a letter or memorandum of intent that provides guidance to your trustee on managing the trust after your passing. Although not legally binding, this document offers valuable insights into your true intentions. You can include details on how the funds should be used in accordance with government rules, specific goals you would like the beneficiary to achieve, and the standard of living you envision for them.
Supporting a special needs child or grandchild can be financially demanding, and it's important to consider how to sustain their care once you pass away. Life insurance can be a valuable tool in ensuring there will be sufficient funds for the trustee to use for their benefit. By designating the SNT as the beneficiary, you can provide a lump sum payment that is not subject to the same tax liabilities as retirement accounts.
The SECURE Act has brought changes to how beneficiaries can receive distributions from inherited IRAs, potentially impacting the financial support available to your special needs beneficiary. However, the Act also recognizes "eligible designated beneficiaries," including individuals with disabilities, who can still receive distributions over their life expectancies. Congress has established rules that allow the life expectancy of disabled beneficiaries to be used for certain types of trusts. If you have a substantial retirement account, it is crucial to discuss your distribution options to maximize benefits for all your beneficiaries.
We understand that securing a bright future for your special needs child or grandchild is of utmost importance to you. Our priority is to work with you in developing a comprehensive plan that will guarantee continued care and well-being for your loved ones. Please do not hesitate to reach out to us to schedule an appointment so that we can begin this process together.
If you have a person in your life who has a disability, your plans for the future must include making sure your loved one is cared for. Unfortunately, many people make mistakes when they make a well-meaning attempt to provide for a loved one with special needs. The actions that you take could impact a disabled person’s access to important benefits, so it is vitally important that you work with a special needs planning lawyer if you have a loved one in your life with a disabling condition.
Anderson, Dorn & Rader, Ltd. can provide comprehensive assistance with special needs planning. Our legal team helps parents with special needs children and other friends and relatives of individuals with disabilities. Give us a call at 775-823-9455 to talk with a Reno special needs planning lawyer about the services we can provide to you and to get answers to questions you have about special needs planning including:
Why is Special Needs Planning Important?
Special needs planning is important to ensure that you can help a relative or friend with a disability to have the highest possible quality of life. For parents of a disabled child, this can mean making sure that a child is cared for and has a loving place to live after parents are no longer alive to provide a home. For parents, relatives, and friends, it can mean providing a financial gift to someone with a disability so that person can have a better standard of living.
Because people with disabilities often rely heavily on government programs such as Supplemental Security Income to provide income or Medicaid to pay for costs of care, you cannot just give a financial gift to a person with special needs. If you make a gift during your lifetime or leave money in your will to a disabled person, you could cause a loss of access to means-tested benefits. Both SSI and Medicaid limit the amount of resources a person can have and still qualify for coverage, and the loss of these benefits could be devastating to someone with a disability.
There are ways you can ensure that a gift does not result in a loss of benefits, and there are steps you can take to ensure your disabled child, relative, or friend is provided for after you are gone. Anderson, Dorn & Rader, Ltd. can help you to explore the legal tools you need to use to make a smart special needs plan.
What is Involved in Special Needs Planning?
In most cases, special needs planning involves the creation of a specific type of trust. A special needs trust is designed to allow a disabled person to receive a financial gift to enhance quality of life, without causing a loss of benefits.
Anderson, Dorn & Rader, Ltd. can help you to create and fund this trust, which can be used to provide for extras that Medicaid, Supplemental Security Income, and other government programs will not cover. We also provide assistance to trustees who have been placed in charge of managing a special needs trust and who want to make sure they comply with the rules so they don’t put benefits in jeopardy.
Our Reno special needs planning lawyers can also provide help to parents in making arrangements for a disabled child to have a safe living situation and a loving guardian after the parents pass away.
Whatever your goals are for the person in your life who has special needs, we can help you to identify the types of legal tools that can allow you to achieve those plans.
How can a Special Needs Planning Lawyer Help You?
Ensuring that a disabled loved one is cared for and has the highest possible quality of life is a noble goal. You do not want your efforts to improve life for someone with special needs to actually cause a loss of benefits or other problems. You need to make sure your gifts you give and efforts you make to help have a beneficial impact now and in the future. Anderson, Dorn & Rader, Ltd. can help you.
To find out about the personalized assistance our legal team can provide with the special needs planning process, give us a call at 775-823-9455 or contact us online today. An experienced and compassionate Reno special needs planning lawyer will offer the type of personalized solutions you and your family need to ensure that a disabled person is always cared for no mater what the future brings.
There are certain trusts that can be looked at as asset protection trusts for people that are exposed to the estate tax. These would be irrevocable trust, but there are other trusts that fit into this category that can be useful for other purposes. Since the names of these devices are wordy, they are often reduced to acronyms, and we will provide some decoding in this blog post.
One of these irrevocable trusts that is not exclusively tied to the objective of estate tax efficiency is the supplemental needs trust. Many people with disabilities rely on government benefits like Medicaid and Supplemental Security Income (SSI). The latter program is self-explanatory for the most part, and most people are aware of the fact that Medicaid is a source of health care insurance.
These are need-based benefits, so an applicant cannot gain eligibility with a significant store of assets in his or her name. As a result, if you want to provide for someone that is depending on Medicaid and/or SSI, you have to keep ongoing benefit eligibility in mind. There is a point of bifurcation at this point that we should cover so that you fully understand the lay of the land.
There is a type of trust called a supplemental needs trust that can be utilized under these circumstances. The trustee would be able to use assets in the trust to satisfy certain needs of the beneficiaries without violating any program rules. It would be possible for a parent, a grandparent, a trustee, or a court to establish this type of trust with the beneficiary’s own money.
As a result, it would be possible for you to give someone a direct gift that is used to establish a supplemental needs trust, which would be a first party special needs trust, That’s the good news, but the bad news is that the Medicaid program is required to seek reimbursement from the estates of people that used these benefits during their lives.
Because of this, if you go this route, Medicaid would absorb any remainder that is left in the trust after the passing of the grantor/beneficiary. To prevent this, you could establish the trust initially with your own resources. This would be a third-party trust, and assets that remain in the trust after the death of the beneficiary would be protected.
The estate tax exclusion stands $11.4 million right now, so if your estate is valued at more than this amount, you have to take steps to mitigate the damage. One type of trust that can be of assistance is the qualified personal residence trusts (QPRT).
Since we are covering a number of different devices here, we are providing short explanations. To execute this strategy, you place your home into the trust, and you name a beneficiary to assume ownership of it after the term expires. You are effectively removing your home from your estate for tax purposes, but the transfer would be exposed to the gift tax, which has the same rate.
When you establish the trust agreement, you set forth a term during which you will continue to live in the home as usual (which is called the retained income period). Let’s say that you choose to instruct the trust to allow you to stay in the home for 15 years.
No neutral buyer would pay fair market value for a piece of property that they could not possess for 15 years. The IRS takes this to into account when the taxable value of the gift is being calculated. Because of this, at the end of the process, the tax on the gift would be much less than the estate tax that would be applied on the immediate and direct transfer of the home after your passing.
The estate tax and the gift tax are applicable on transfers to anyone other than your spouse, as long as your spouse is an American citizen. If you are married to someone who is a citizen of another country, you could establish and fund a qualified domestic trust (QDT.)
Your spouse could receive earnings from the trust estate tax-free throughout his or her life if you do in fact die first. Portions of the principal could be distributed as well if you stipulate this in the trust declaration, but the estate tax would be applicable on these transfers.
After the passing of your surviving spouse, your final beneficiaries, presumably your children, would assume ownership of the trust. Transfer taxes would be a factor, but the resources would have earned income for a longer period of time while your surviving spouse was still alive.
We are here to help if you would like to learn more about advanced trusts or any other estate planning matter. You can send us a message to request a consultation appointment, and we can be reached by phone at 775-823-9455.
A lot of people look at estate planning as an exercise in slicing a pie into pieces of different sizes. Of course, you have to determine exactly what you would like to leave to each person on your inheritance list. However, there is another dimension that many people do not think about.
You should also consider the life situation of the people that will be receiving inheritances from you when you are gone. In this blog post, we will look at two scenarios that can be addressed in certain effective ways.
Special Needs Planning
If you are going to be leaving an inheritance to someone with special needs, you must consider the impact it will have on government benefit eligibility. Most people with disabilities rely on Medicaid as a source of health insurance. This program is only available to people with limited financial resources.
Clearly, a significant percentage of individuals with special needs cannot work and earn income. There is a program called Supplemental Security Income that provides financial help for qualified people, and once again, this is a need-based program.
Once eligibility is gained, it is not necessarily permanent. A change in financial status can trigger a loss of benefits. For this reason, you have to take the right steps to provide for a loved one with a disability in the ideal manner.
Under these circumstances, you could establish a supplemental needs trust. To implement this strategy, you fund the trust, and you name a trustee to act as the trust administrator. The person with a disability would be the beneficiary.
Medicaid and SSI do not satisfy all the needs of recipients, so assets in a supplemental needs trust could be used to provide goods and services that are not covered by these programs. As long as the trustee acts within the guidelines, benefit eligibility would not be negatively impacted.
Not everyone is good at managing money, and if you are going to be leaving an inheritance to a beneficiary with spendthrift tendencies, you should take certain precautions. One way to address this would be to make this individual the beneficiary of a revocable living trust.
To go this route, you fund the trust, and you can act as the trustee and the beneficiary while you are living, so there is no loss of control. You name a successor trustee in the trust declaration along with your spendthrift heir as the successor beneficiary.
After you die, the trust becomes irrevocable, and the beneficiary would not be able to change the terms or directly access the funds that are in the trust. The trustee would distribute assets to the beneficiary in accordance with your wishes.
So, let’s say that you have income producing assets in the trust. To provide a very simple hypothetical example, the assets earn $60,000 a year. You could instruct the trustee to distribute $5000 to the beneficiary each month, and principal would remain intact to generate income over the long haul.
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We have looked at just two of many different scenarios that can be addressed through custom crafted estate planning strategies. If you would like to access more information on the subject, you are in luck.
Our Reno living trust lawyers go the extra mile to provide educational opportunities, and to this end, they are holding a number of Webinars over the coming weeks. They are being offered on a complimentary basis, but we do ask that you register in advance for the session that fits into your schedule.
You can get all the details and obtain registration information if you take a moment to visit our Webinar page.