Financial Planning for the Future

Do you understand the three components of estate planning?

It's important for all parents and family caregivers of persons with developmental disabilities to make an estate plan. It is made up of three components: a will, a special needs trust, and personal financial planning.

If you die without a will (this is called dying "in testate"), your estate must go through probate, which freezes all your assets for at least three months. Therefore, MAKING A WILL is the first step in protecting your loved one's present and future eligibility for government benefits. A will is also a good way to specify what you want done. You need to find an attorney who is knowledgeable about wills involving people with disabilities. One way to find such an attorney is to contact the local ARC. Another is to talk with other parents who are pleased with the attorneys they have used. A third option may be to call the Legal Aid Office in your area for assistance. When considering what is involved in writing your will, be aware of the issues mentioned in the legal section such as guardianship. You may not need to name a guardian advocate now for your loved one. However, it is inevitable that the day will come when you are no longer able to provide care or personal oversight. At that point, someone else will have to be responsible for assuring that your relative continues to receive the "extras" that make for a good quality of life. That is why it is imperative that you plan now to ensure your loved one's future legal protection and financial security.

If your loved one receives a direct inheritance from your estate in excess of $2,000 (the present limit), he/she will lose SSI for that month and every month until the individual "spends it down." It may even make your relative ineligible for Medicaid, since Medicaid and SSI have a "means test." (Social Security and Medicare do not and would not be affected by an inheritance.) Therefore, the second action needed in estate planning for a loved one with a disability is to establish a SPECIAL NEEDS TRUST. An attorney experienced in disability law will set up this trust so that it goes into effect while you are still alive and can be the trustee or, so that the trust goes into effect upon your death. In the latter case you will need to name a trustee (and perhaps a co-trustee) to manage the funds in the trust for the benefit of your loved one. Because the funds are not directly available to your relative, his/her government benefits will not be interrupted. You may fund the trust with money, property or other assets of value, either now or through your will. Once it is established, others may also contribute assets to the special needs trust fund to benefit your loved one. In fact, it is good to advise uncles, aunts, grandparents and other relatives of the trust fund and its legal name, so that any who may wish to contribute have the correct information to do so.

Sometimes parents want to leave the family home to an adult child with a disability, but are concerned about a potential loss of benefits. As long as the home is the individual's primary residence (he/she actually lives there) benefits will not be affected. Other families may want to leave the home to the trust with discretion to the trustee for its use. Instructions may be left that the home should either be maintained as the place of residence or sold/rented with the proceeds going into the trust and used for the loved one. If the home is left as the person's residence, sufficient monies should also be provided to pay for taxes, repairs and maintenance. Each individual trust can and should be tailored to the assets of its creator (for instance, a modest insurance policy may be all that is available for funding) and the expected supplemental needs of the beneficiary. Finally, you should also specify to whom any remaining funds will go upon the death of your loved one (beneficiary). This may be a person(s) or an entity.

The third necessary action is PERSONAL FINANCIAL PLANNING. You may have already completed part of this activity if you have made your will. However, it should be updated according to the plans you make for your loved one, as well as reviewed periodically for any needed changes. Depending upon your age, you may need to make or adjust investments or insurance policies for your own retirement years. The same financial professional who helps you determine funding for the special needs trust can also help you look at the broader picture of your own financial security, and how the use of your assets will affect the estate you want to leave to your loved one and to other heirs in the future.

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