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Estate Planning for Disability and Special Needs

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In planning for the disabled and those with special needs there are:

  1. Management  Issues;
  2. Control Issues;
  3. Public Benefits Issues.

As an example, a typical simple will plan may have a grandmother leaving her legacy and funds to the disabled grandchild since she sees the greatest need.

WHO WILL MANAGE THE INHERITANCE?

However, the grandchild may not be able to manage the funds if:

    1. the heir grandchild is a minor (possibly requiring a court appointed guardianship).
    2. the heir grandchild (that maybe a 50 year old) has been determined mentally incapacitated as an example.

WHO WILL CONTROL THE INHERITANCE?

Who controls the assets (money) If the heir grandchild is not capable of managing his/her affairs or the funds?

  1. Guardian appointed by the Court;
  2. Natural guardian for small amounts (typically a natural parent).

What happens when a person with special needs receives an inheritance while receiving public benefits such as Medicaid for healthcare needs?

In many cases, the heir with special needs will be disqualified from the public benefits and health care coverage needed by the heir by receiving an inheritance exceeding the governmental limits.

HOW TO AVOID PROBATE?

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One way of avoiding probate is to a Revocable Living Trust.

Advantages of Revocable Living Trust:

  1.  CONTROL: A revocable living trust provides the flexibility of allowing the grantor(s) to be the trustee during life.  In other words, the grantor(s) can continue to control the assets;
  2.  CHANGEABLE:  A Revocable Trust can be changed or canceled at any point prior to death;
  3. INCAPACITY PLANNING:  A revocable can be used for incapacity planning by having successor trustee or co-trustee take over in the event of incapacity of grantor/trustee;
  4. PROBATE AVOIDANCE, DEATH AND INHERITANCE PLANNING: Upon the death of the grantor(s),  the successor trustee is responsible for executing the instructions of the grantor without court action and privately.  The same as a vice president would take over for a president of a company.  The line of succession would be clearly stated.
  5. ACCESS TO FUNDS OR ASSETS OF TRUST:  The grantor/trustee is allowed to withdraw or deposit  or transfer without limitation.

Disadvantages of a Revocable Living Trust:

  1. NO ASSET PROTECTION:  Since the grantor/trustee has full access, the judgment creditors of the grantor can force collection against the trust.
  2. NOT OUTSIDE OF TAXABLE ESTATE FOR ESTATE TAX PLANNING PURPOSES:  In general, the assets are still considered to be part of the taxable estate of the deceased grantor.

PURPOSES OF TRUSTS

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PURPOSES OF TRUSTS

  1. PROBATE AVOIDANCE.
  2. ASSET PROTECTION.
  3. INCAPACITY PLANNING.
  4. ASSET MANAGEMENT.
  5. PROTECT AND MANAGE ASSETS OF MINOR OR SPECIAL NEEDS CHILDREN.
  6. DIVORCE PROTECTION AND PRE-MARITAL PLANNING.
  7. REMARRIAGE PROTECTION.
  8. LONG TERM CARE PLANNING: PROTECTION AGAINST HEALTH CARE COSTS.