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.

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Disabled loved ones? Avoid this inheritance mistake

A real-life fact pattern with a client was that Grandma and Grandpa wanted to provide something in their wills to provide for their two grandsons who are disabled.  They decided they were going to leave them the farm.  The thought was not that their grandsons would live on and run the farm, but that it would be sold after their deaths and the proceeds would go to their grandsons who were both disabled.  Grandma and Grandpa had very good intentions, particularly since just the land alone had a fair market value of close to $10,000 an acre.  Great, right?  No.

This blog post is for families that include a loved one with a disability.  It is for parents, certainly, but also for extended family who choose to provide a bequest (personal property) or devise (real property, such as house and land) for a disabled family member.  The good intentions of family members in leaving money or property to a person with a disability might do more harm than good.

First, it is almost never recommended to leave an inheritance to a person with a disability unless there is a special needs trust for that person in place (I include Ohio’s “wholly discretionary trust” when I use the term “special needs trust”).  People with disabilities often receive benefits such as Medicaid, or Social Security Income, that could be jeopardized.

Second, the need for such a trust to be in place is the subject of this blog post—the critical mistake I’ve encountered with clients is that they have a special needs trust plan, but it has a certain type of special needs trust that only takes effect at death, called a testamentary trust.  There are trusts that are in existence now and are not funded until death, but that is not a testamentary trust.  To the contrary, with a testamentary trust, the trust itself actually comes into existence at death.  (Most of the situations that I have seen involve testamentary “supplemental services” trusts.)  If testamentary special needs trusts are valid and enforceable, what is the problem?  The problem is the real-life scenario in the top paragraph.

The last of the Grandma-Grandpa unit dies and leaves the 10-acre farmhouse and farm to disabled grandsons “Johnny and Joey.”  However, Johnny and Joey’s parents are still alive, and have a testamentary supplemental services trust (special needs trust), where the special needs trust does not come into existence until Johnny and Joey’s parents die.  In this scenario, there is no special needs trust in existence now, when it is needed.

Except in rare circumstances, I prepare stand-alone special needs trusts that are in existence immediately after they are executed (signed and witnessed).  If the boys’ parents or grandparents had a trust prepared that was already in existence, Grandma and Grandpa’s inheritance could have been left to the boys’ trusts, as well as  inheritances from others.  Because parents might not be the only people who choose to leave an inheritance for a person with a disability, their testamentary special needs trust is not the recommended choice in special needs planning.

If you have questions or would like to begin estate planning with a disabled loved-one in mind, email me at julie@juliemillslaw.com.

All I want is a simple will.

Legal resources for handling your own legal matter should be made more readily available for the public since the cost of hiring an attorney can be too expensive for too many.  In some situations, handling your legal matter yourself can be done if you are diligent about researching what you need, what is available, and what is required.  Unfortunately, the trap of “you don’t know what you don’t know” can ruin the best-laid plans, particularly estate plans.

“All we want are simple wills.”  This statement is followed by the direction that the couple (let’s assume they’re married) wants to leave everything to their spouse first, then the kids.  That does sound simple:  Mike and Carol Brady’s will would leave everything to each other then to their kids.  What could go wrong?

A popular do-it-yourself-will website posted an article that shows the reader how easy it is to write your own will.  First, name your executor.  Second, name “guardians for young children.”  Third, describe how assets will be divided and distributed.  Fourth, sign in front of two witnesses, then have them sign.  This is great too—again, what could go wrong?  This does sound easy.  Who needs an attorney!

Let’s examine the Brady’s “mirror wills” (they mirror each other—all to spouse, then to kids equally).  The first red flag is that the Brady’s have children from other relationships, and like most blended families, the kids aren’t adopted.  In most states, stepchildren do not inherit (unless specifically named).  Here, a typical will would state “I leave all my assets to my wife Carol; if she predeceases me, then to my children in equal shares.”  Mike dies, and all of his assets go to Carol.  Carol dies, and her mirror will states “…all of my assets to Mike; if he predeceases me then to my children equally.”  At Carol’s death, she had inherited all of Mike’s assets from when he died.  Since Mike predeceased her, then all of her assets, including from Mike, go to Marcia, Jan and Cindy.  Those are her children.  Greg, Peter and Bobby are her stepchildren.  What do the boys get?  Nothing under this standard, simple will!

Now let’s examine the do-it-yourself article.  Name your executor—not too hard, although the article did not mention naming successor executors, but most people would know that.  However, “Name guardians for young children.”  I name my brother John Doe and his wife Jane as guardians because they know and love my kids.  What if they divorce—now my kids might be in the middle of a custody fight because both were named guardians.  What if my brother John is killed in a car accident—does my sister-in-law keep my kids?  She would if both are named.  Or at brother John’s death would I then want my kids to go live with my sister so my kids remain with a family member?

The best (insert a little sarcasm) advice is “describe how assets will be divided and distributed.”  That appears easy to do—divided evenly among my 3 kids.  I see that phrase often in wills, “to my children equally.”  Dad dies, Kid 1, Kid 2, and Kid 3 each get an equal share of his estate.  But what if Kid 3 died before Dad?  An attorney would counsel you, and prepare accordingly, whether you want your estate divided between Kid 1 and Kid 2, or if you want one share to Kid 1, one share to Kid 2, and one share to go down to the children of Kid 3 (Dad’s grandchildren).

Most people who do their own wills and estate plans think the documents are good, but they don’t know what they don’t know, and they definitely won’t know because they’ll be dead when any problems are discovered (“oops, Dad disinherited his grandkids”).  Simple wills are not that simple in many instances.

Grandparent Visitation Rights in Ohio

Grandparents have rights to visitation with their grandchildren under certain circumstances. If a child’s parents are unmarried; if the child’s parents start divorce, dissolution, or legal separation proceedings; or if one of the parents has died, a grandparent can ask the court for companionship or visitation rights if the grandparent can show he or she has an interest in the welfare of the child. The child’s parents can object, but ultimately the court will decide on grandparent visitation based on what is in the best interests of the child.
 
Sometimes a grandparent with visitation rights believes these rights are permanent. Grandparents can have their rights terminated if a parent can show a change in circumstances that makes visitation something that is not in the child’s best interest. One example of a grandparent having visitation rights taken away is when their son- or daughter-in-law (parent of the child) remarries and the child’s new stepmother or stepfather adopts the child (stepparent adoption). Under Ohio law, the grandparent becomes a “stranger,” legally, to the child. The grandparent would have no rights to visitation, or anything, with the grandchild. Perhaps he or she could still visit with the grandchild, but this would be at the discretion of the parents.
 
Grandparents’ rights to visitation with their grandchildren in Ohio are not as strong as in other states. There are states that permit visitation for grandparents with a grandchild who has been adopted, but Ohio is not one of them. If you have questions, don’t hesitate to reach out to see if I can help at julie@juliemillslaw.com.

Elderly parent and assisted living

A friend is facing the prospect of having to consider assisted living for her mother.  “Mother” is friendly, enjoys people her age, and although she loves all five of her grandchildren she does not want to live with them.  She wants to remain at home but, because of dementia, she needs a “memory care” facility.  She finally agreed to other living arrangements after forgetting about a pan of food frying on the stove and nearly burned her house down.

Addressing these issues before there is an immediate need for assisted living is preferable because an elder law attorney can work with you to qualify for Medicaid without losing much of what you own.  To qualify for Medicaid you must have no more than $1,500 in assets.  What you have, after considering exempt assets and other factors, must be “spent down.”  Taking this journey without an attorney is, in this attorney’s opinion, a poor decision.  Many people who decide to apply for Medicaid sell their home, mistakenly believing it will be taken–it is typically an exempt asset.  Unfortunately, then, the proceeds from the sale of the home (an asset that was previously exempt) are then a countable asset which will increase the amount you must spend down.

Takeaway: if a loved one will be entering a nursing home or assisted living facility, and will need to apply for Medicaid, consult with an elder law attorney.  The money you pay for the attorney’s counsel will likely not come close to the money and assets you will protect if applying for Medicaid.

Grandparents rights in Ohio…

…are not as strong as in other states.  Custody and visitation are both permitted but both are very different in difficulty to obtain.

In Ohio for a grandparent to get custody of a grandchild, the child’s parents need to be proven unfit or unsuitable to parent.  This is a difficult obstacle to overcome and prove but can be done.  The court will make its decision of “unsuitability” based upon whether custody with the parent has an adverse impact on the child.  The court will not base its decision on whether society disapproves of the conduct of the parent–if there is no adverse impact on the child, there might be no finding of “unsuitability” of the parent.

Visitation is a different journey.  If a grandparent has had an active and involved role in a child’s life, there is a good chance that a grandparent can petition successfully for visitation rights in Ohio.  In fact, Ohio permits grandparent visitation, by statute, in three circumstances:

  1. when married parents separate or terminate their marriage;
  2. when a parent of a child is deceased; or
  3. when the child is born to an unmarried woman.

Grandparents can ask a court for visitation even after the parent’s divorce is final.  Regarding visitation, the court will make its decision based upon what is the best interest of the child.

The takeaway here is to act quickly.  Contact an experienced family law attorney in your state if you want to pursue custody or visitation rights with your grandchild.

 

 

Kids, your vacation, and medical decision-making.

You finally have a vacation planned, and your parents will be watching the kids.  Everything on your To Do list is done, but I bet there is one thing that you did not have on your list–have a medical power of attorney prepared.  (If you have had one prepared, then my apologies for doubting you.)

What happens when your child is injured or sick and requires medical attention when you are not there?  If you are in Hawaii, and your parents are watching your children in Ohio, and consent is required to treat your sick or injured child, what is the fastest route for obtaining that consent?  It might not be calling you, or otherwise tracking you down, especially if you are snorkeling or on a helicopter getting a tour of the islands from the air.  The fastest route to getting your child treated at the hospital is for Grandma or Grandpa to pull out the medical power of attorney that you had prepared and gave to them, naming them as agents to make medical decisions for your child.

Things to consider include any treatment you object to, how long the document should be in effect, and perhaps successor agents just in case your primary agents (here, Grandpa and Grandma) could not serve.

Have your attorney prepare a medical power of attorney for you so that it complies with your state’s laws.  Having one prepared provides true peace of mind.