Do you have a child with special needs? Avoid these 5 planning mistakes

Mistake #1:  Not preparing a stand-alone special needs trust that is in effect immediately.

Some attorneys incorporate a special needs trust for a disabled child into the parent’s estate plan, to take effect when the surviving parent dies.  This mistake can be costly.  If the child was to receive an inheritance from a relative when the parent is still alive, that gift would go to the child, and would become an asset that might interrupt the child’s receipt of benefits.

Mistake #2:  Naming the child individually instead of his or her trust on retirement and insurance beneficiary designations.

Naming the child individually on your beneficiary designations, instead of the child’s special needs trust, will result in the eventual inheritance going to the child outright instead of the child’s special needs trust.  The inheritance will then become a countable resource that will likely cause the child to lose certain benefits.

Mistake #3: Not telling family and others that a special needs trust exists.

For family (especially well-meaning grandparents) and others  who might include your child in their estate plan, they need to name the child’s trust as the beneficiary, and not the child.  They will not know to do this unless they are informed that a special needs trust exists.  As with Mistakes #s 1 and 2, any inheritance left outright to a child who receives benefits might jeopardize receipt of those benefits.

Mistake #4:  Opening a 529 plan.

Not to pick on grandparents again, but it is common for grandparents to open and fund 529 plans for their grandchildren.  This could be costly for a child with special needs.  If the child  does not go to college, and needs SSI or other benefits at age 18, assets in a 529 plan will likely disqualify the child from receiving benefits, at least until the assets in the plan are spent down.  The child would then have to reapply for benefits.

Mistake #5: Leaving no Letter of Intent.

A Letter of Intent is a comprehensive guide that you prepare for when you are unable to care fr your child, either due to your death or incapacity.  The guide is for the child’s caregivers to ensure a smooth transition in every aspect of their day and life after the surviving parent passes.  Change in routine is very difficult for many kids, particularly those with special needs.  Grieving the loss of a parent makes this transition even more difficult.  The Letter of Intent advises the caregiver of the child’s daily routine, activities, likes and dislikes, among many other things to ease a tough transition.

If you would like to discuss planning for your child with special needs, contact me at julie@juliemillslaw.com.

A *Must* for Kids Going to College

Your child has selected a college.  In no time, your child will be starting classes.  Because he or she will technically be living at home (home over holidays and summers), perhaps still on your insurance, and possibly still driving one of your cars, it doesn’t really feel as if they’re off to adulthood, does it?

At age 18, under the law, they are adults.  (For children with disabilities, the age of majority might differ.)  They are legally no longer under your dominion.  They might even balk at that, since they are driving your car, to your house, covered by your insurance.  Regardless, they are legal adults.  And, as young adults heading off to college, they should have three critical documents: a HIPAA release, a healthcare power of attorney, and a financial power of attorney.  (In Ohio, some of these documents overlap.)

Many parents are genuinely shocked to learn that, when they call the hospital where they learn their daughter has been taken after being hurt, the hospital won’t release much information to the parents.  She might still seem like your young child, but she’s an adult now and the hospital needs a HIPAA release in order to provide you with information.  Or, the bank won’t permit you to access your son’s accounts to break a lease, sign for loan or scholarship documents, etc.  When I state “child” below, I am referring to an 18 year-old.

The Documents:

1. HIPAA Authorization: most of us have heard of HIPAA.  The Health Insurance Portability and Accountability Act is a federal law that, among other things, protects the medical privacy of patients. If you are 18 or older, medical providers, hospitals, etc. will not provide your private medical information to a third party without a release from you.

Your child would list people he or she wants to be granted access to his or her health information, and your child would sign it.

2. Healthcare Power of Attorney: a healthcare power of attorney grants the agent your child lists in the document with the power to make healthcare decisions for your child if he or she is unable to make them for yourself.  If your son is in a car accident and the hospital can pursue different courses of treatment, it is the healthcare power of attorney who will make the decision on what to do.  If there is no living will and end-of-life decisions must be made, it is the healthcare power of attorney who will make them.  Additionally, if your child is receiving care you believe to be substandard, or you prefer treatment at a hospital you believe is better equipped to provide, you can choose to change hospitals (or doctors) if you are the agent in charge of your child’s healthcare.

Your child lists one agent and two successors, then signs the document in front of two witnesses or a notary (Ohio requirements).

Note: in Ohio, a HIPAA release is included in the most recent version of Ohio’s Healthcare Power of Attorney.

3. General Durable Power of Attorney (Finances): a financial power of attorney permits the person the child names as agent to make financial decisions on the child’s behalf.  If your child becomes incapacitated, whether it requires a lengthy hospital stay, or leg casts making it impossible to leave a house, a financial power of attorney permits the agent—likely you, the parent—to pay your child’s bills, enter or break a lease, manage bank accounts, pay taxes.  Likewise, it permits the parents to discuss other housing issues, educational and financial institution matters.

Your child lists an agent and two successors, and signs the document in front of two witnesses and a notary (Ohio requirements).

I recommend these documents for kids going off to college so that a parent can step in when needed.  Most attorneys offer these documents separately; and some attorneys offer them together as “New Adult” packages as I do.

Please contact me at julie@juliemillslaw.com if you want to arrange for these documents before your child goes off to college.

Starting a nonprofit: There’s more needed than a desire to help

All of my nonprofit clients have one thing in common—they want to help.  They have a cause they’re passionate about and they want to do more than donate their money, they want to have their hands in every aspect of helping.  They are ready to devote their time and energy to make an impact on their cause, whether it’s helping children or animals, supporting veterans, revitalizing their community, assisting seniors or people with disabilities, educating through art, and other very worthwhile causes.  They contact an attorney to set up the paperwork, and once that’s finished, they can focus solely on helping.   And, that is the problem.

Forming a tax-exempt nonprofit is a business.  It is not something where you file a few forms, wait for acceptance, and the business aspect is over—the “business aspect” is ongoing.  It is, in my opinion, more than a business because, once tax-exempt, you belong to the public, must be transparent to the public, must operate in accordance with state corporate law, and you will have Attorney General and IRS oversight.

Consider the following before deciding to start a tax exempt nonprofit organization:

I.  Have a business plan.

• What is your purpose and mission?
• Who is your audience?
• What are your financial goals?
• Do you have the resources to start this? In Ohio you must:
  • Form a nonprofit corporation, which costs money;
  • File for tax-exempt status with the IRS, which costs money; and
  • Register with the Ohio Attorney General.

II.  Form a Board of Directors.

• You should choose people dedicated to your cause.
• You should choose people who have business, legal or accounting experience.
• You should choose an odd number of people to ensure no tie vote.

III. Legal

• You should have an attorney help you form your corporation
• You should have an attorney advise on developing organizational documents such as bylaws, waivers and releases, volunteer forms, contracts.
• You should have an attorney advise the board on their rights and responsibilities, activities that could jeopardize tax-exempt status, legal issues in fundraising, and other legal matters.

Starting a nonprofit is starting a business.  It should be run like a business.  Nonprofit organizations can make a profit, what differs is where the profits go.  If you are ready to run a nonprofit, I suggest researching articles at National Council of Nonprofits, or Nonprofit Hub, and develop a business plan first, so you are well-informed on what is required.  Running a nonprofit successfully will allow you to have a greater impact on your cause.

If you would like to form a tax-exempt nonprofit or have additional questions, contact me at julie@juliemillslaw.com.

The Poor Man’s Trust

A “Poor Man’s Trust” (I’ve seen it called “Poor Man’s Will” also) is the estate plan you create by naming beneficiaries on accounts, and titling property as transfer-on-death to have it pass to the person you name, all to avoid probate.  Your bank accounts are payable-on-death (POD), your life insurance and retirement policies all have named beneficiaries, and the deed to your house has a transfer-on-death affidavit recorded leaving your home to a named person on your death, resulting in these assets passing to the people you have designated outside of probate.  Why, then, would you need a will, or revocable trust?

This planning method might work for some.  I am in the group of attorneys who believe that access to legal help should be more affordable, and that living trusts are often over-hyped.  So in some limited circumstances, this method of planning might be acceptable.

If you are leaving everything outright to certain people, then designating beneficiaries like this might accomplish your goals.  For example, Joan is an older single woman whose husband died decades ago, she has an adult child or two.  John never married and has no children.  Perhaps beneficiary-planning might work for them.  However, few people have such an uncomplicated situation to make this method of planning workable.  It might not work for “uncomplicated” Joan or John, either.

The Poor Man’s Trust is certainly less expensive short-cut to having a will or trust.  As with most short-cuts, however, there will be a cost:

• Stories of fraud are common with people convincing elderly people to change beneficiaries on their beneficiary forms
• If you leave everything to a beneficiary, the administrator of your estate might have to go after the beneficiary to pay back money for your funeral and last expenses
• If your beneficiary predeceases you, the state laws of descent and distribution decide who gets your assets, not you
• Your beneficiary’s creditors can go after everything you leave him or her the minute it comes into their possession
• If you have a surviving spouse, he or she could change the beneficiaries you have named
• If Joan above left life insurance to her son with wishes that he distribute some to charity, or another relative, there is nothing to ensure that he does so

Having a will ensures that your assets reach their intended destination—your executor and the court will see to that—as well as pay your final expenses so beneficiaries aren’t forced to repay your estate.  A living trust will provide for you during periods of incapacity, unlike beneficiary planning.  If your desire is to avoid probate, a trust does that.  Additionally, a trust would ensure that people are not unintentionally disinherited through fraud, or changing beneficiaries on a form, as well as distribute to beneficiaries at certain times to avoid creditors attaching.

Most importantly, a Poor Man’s Trust is absolutely inadequate if you have minor children.  You need a will to name a guardian, and you need a living trust to provide for their education and future without you (a will distributes everything to a child once they reach 18).

If you still believe beneficiary-planning is for you, I would recommend at least a Last Will and Testament that names an executor to ensure final bills are paid, particularly funeral expenses.

See this article on Poor Man’s Trust method of planning.

Contact me at julie@juliemillslaw.com to discuss this and other methods of estate planning.