What is “Estate Planning”?

Estate Planning is about making sure the people you love (and that includes you) benefit from your assets, with the right people in charge at the right times.

It means you are in charge now, and those you trust have authority when you are incapacitated. It means planning with certainty, instead of leaving to chance who gets what by joint tenancy and death beneficiary designations. It means those you love receive an inheritance from you in a way that they can control (if appropriate), not their creditors or (ex-) spouses. It means reducing unnecessary taxes when you die. 

It means passing on important funds for your special needs loved one without disrupting critically important benefits.

What’s Included in a Robust Estate Planning Portfolio  

A solid estate planning portfolio will include the following legal documents:

Last Will and Testament.  

A Will alone does not avoid probate. Traditionally, a Will divided up the estate among various beneficiaries and left those assets to them outright. But a Will only controls assets that do not pass by joint tenancy, death beneficiary designation (like life insurance and IRAs), and trust ownership. Therefore, many Wills today simply “pour over” any probate assets to the decedent’s revocable trust, which then contains all of the provisions about who gets what and how (whether in further trust or outright). Even if you anticipate no probate assets, a pour-over Will is important to name an Executor/Executrix and give that person important powers.

Trusts.

Many different types of trusts can be used depending upon your objectives, including revocable, irrevocable, testamentary, and special needs. Depending upon the intended goals, there could be several advantages to establishing a trust. These include probate avoidance, estate tax planning, asset protection planning for children (including protection from potential creditors, bankruptcies, and divorce), and special needs/public benefits planning. You also get to decide who is in charge (the trustee) when and under what circumstances. Depending on your goals, the trustee can even be your responsible grown children.

Durable Power of Attorney.

This vital legal document gives another individual (the “attorney-in-fact”) typically broad legal power to make financial and legal decisions and take actions on your behalf, so long as the decisions/actions are not ones the attorney-in-fact knows you would not want.

If you become incapacitated and do not have a well-drafted Durable Power of Attorney, many commonplace actions (e.g., paying your mortgage) may be impossible without getting a court-ordered guardianship/conservatorship, unless a spouse or other joint tenant is on your bank account. And many other actions, such as selling your home or engaging in tax or public benefits planning may be impossible, even with a court-ordered guardianship or conservatorship.

Healthcare Documents.

A Health Care Proxy (called a “Durable Power of Attorney for Health Care” in some states) is a legal document that makes a (typically broad) grant of powers over medical decision-making, but only in the event you cannot make or communicate medical decisions.

It can also describe your preferences regarding end-of-life decision making. A HIPAA Authorization allows doctors, hospitals, other medical providers, and health insurance companies to speak with and provide records to those you specify without violating federal medical privacy rules.

Detailed Estate Plan Funding Instructions.

This is not a legal document, but in ways may be the most critical document Special Needs Law Group of Massachusetts delivers to its estate/special needs planning clients. In order for your estate plan to control your assets, the two must be connected together.

This is done by strategically arranging either ownership of assets (say, by your trust), or death beneficiary designation of certain assets (like IRAs and life insurance), so that your estate plan controls those assets the way you want when you cannot be in control.

What is Special Needs Planning?  

The main concern for parents raising a child with special needs is what will happen to that child once mom and dad can no longer provide their care, financial support, advocacy, and oversight.

From planning their transition to adulthood to planning for your child’s entire life without you, Special Needs Law Group of Massachusetts offers unique counseling from the perspective of specialized attorneys who have navigated the “system” for not only clients but for their own special needs children, as well.

One of the biggest transitions for our special needs children is the transition to adulthood, but there are others. For example, the transition from living with parents to living elsewhere, and the transition from parents as primary advocates and care managers to a time when the parents are no longer living or can no longer do the job.

Matters that must be addressed in special needs planning include:

• Setting up legal authority, such as guardianships (or possibly powers of attorney)
• Securing public benefits, working with adult services agencies, and setting up supports
• Elements of adult living – Where and with whom will your child live; Who will have authority to advocate for your child; Teaching and learning independent living skills; exploring employment opportunities
• Trusts and providing adequate lifetime financial resources

What is a Special Needs Trust?

One (one of many) important aspect of that planning is a Special Needs Trust for your child. Contrary to popular impressions, a special needs trust is not limited to spending money on disability-related products and services for the beneficiary.

It is simply a trust that gives the trustee complete discretion, and so does not require the trustee to support the beneficiary or, importantly, does not have language that Social Security or MassHealth could misconstrue as requiring the trustee to support the beneficiary.

If you see mandatory distribution terms in your trust for your special needs child, or language in your trust such as “health, education, maintenance, and support,” your trust could be considered a countable asset and disqualify the beneficiary from public benefits that have a countable asset limitation. (For example, SSI and some forms of MassHealth have a countable asset limit.)

There are two types of Special Needs Trusts:

Third-Party Special Needs Trust.

These are created and funded by someone other than the person with special needs. Most commonly, it is created by the parents, and funded by them when they die. In other words, it is funded with the child’s inheritance.

Self-Settled Special Needs Trust (“d4A Trusts”).

“Self-settled” means the trust is funded with the disabled beneficiary’s own assets. Those assets could come from accumulated SSI benefits or wages, an unexpected inheritance, or a personal injury lawsuit. In order to be non-countable for MassHealth and SSI, the trust must be created by the beneficiary, the beneficiary’s parent, grandparent, or guardian, or a court. The trust must also have a provision that pays back Medicaid (MassHealth) on the death of the beneficiary.

At Special Needs Law Group of Massachusetts, we are attorneys who help clients throughout Massachusetts with reliable estate and special needs planning solutions that protect assets and get them to the intended beneficiaries in accordance with your wishes.