Benefits of a Trust

A trust is a contract, or a relationship, between the person who makes the trust (Grantor) and the person who manages the trust (Trustee).  These are often the same person, initially.  I make a trust (Grantor), and I manage the trust while I’m alive and competent (Trustee).  The Trustee manages the assets that are in the trust for the benefit of the beneficiaries, who are people the Grantor chooses to receive assets that are in the trust.  (I, as Trustee, manage assets in the trust such as investments, insurance, real property, etc., for the benefit of my children who are my chosen beneficiaries.)

Why have a trust?

The premier reason for a trust, in my opinion, is to maintain control from the grave.  For example, if you have assets such as a house and retirement plan, and if you have a minor-age child when you die, your child will inherit everything–value of your house, retirement, assets—when he or she turns 18.  It is likely that an 18 year-old person will mismanage (likely deplete) that amount of money.  If you had died with a trust, however, the trust could have reserved money for college, would distribute money at certain staggered intervals (my clients typically choose a portion distributed to the child at 25, then 30 and then 35).

Benefits of a trust

Beyond “control from the grave” for the benefit of children, however, are other important benefits to a trust.

  1. Trusts do not have airtight privacy control but, as private contracts, are typically private.  This is the opposite of probate and guardianship proceedings, which are both public matters.  With a trust, you can avoid both probate and guardianship.
  2. Avoid probate if you own property in other states (ancillary probate). For snowbirds and others who own homes and other property in another state, if the property is held by (deeded or titled to) a trust, then you do not have to have ancillary probate.  If you died owning a condo in Florida, you would have to hire a Florida attorney to probate your Florida property, unless the condo was held by the trust.
  3. A trust can serve as ‘contingent beneficiary.’ If you have a life insurance policy and name the trust as the beneficiary, then at your death the payout is to the trust which then manages that money according to the terms you set.  If the payout goes directly to a child, the money could be depleted, or attached by creditors (your child’s divorcing spouse, or a victim of car accident your child/beneficiary caused, etc.).
  4. Protect assets from surviving spouse. Assets in a trust are not part of a probate estate, which means that they are not subject to a surviving spouse’s right under law to elect against the will.  A trust reduces the chances that a surviving spouse can change the deceased’s estate plan after death, which can be important in blended families.
  5. Protect assets from creditors of Grantor’s estate. Assets in a trust are not part of a probate estate, and creditors generally cannot get to those assets.  If I died with creditors wanting to get to my estate’s assets, the creditors would not be able to get to assets in my trust.  Of course, there are some exceptions to this.
  6. Control the disposition of your assets. This benefit is similar to what I describe in the “Why Have a Trust?” paragraph above, but goes deeper.  You can determine the terms of the trust.  You can decide on whatever terms you want, except those terms that are against public policy (“nothing to my daughter if she marries someone outside of her race,” or “at my death dump the waste from my chemical company into the nearest river”).  Some terms my clients have chosen include distributions to a beneficiary with addiction issues conditioned on passing drug tests, certain incentive distributions for a beneficiary pursuing higher education or receiving certain grades, etc.  You can leave assets to a disabled beneficiary without jeopardizing that beneficiary’s government benefits (typically Medicaid and SSI).  You can provide funds for the down payment of beneficiary’s first house or a car upon graduating from college.  A trust can do most everything for a beneficiary that you would want to do if you were alive.

Trusts do cost substantially more than wills.  The cost of will plans is in the hundreds of dollars, where the cost of trust plans often starts at about $1,200.  However, probating an estate (with only a will) will likely cost more than having a trust plan prepared.

A trust is not for everyone.  I highly recommend trusts for people with minor age children, blended families, and for those who wish to maintain control over the disposition of their assets after they die.

To find out if a trust is for you, email me at julie@juliemillslaw.com.

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Study: Parents are not planning for future of child with disabilities

A recent “Disability Scoop” article reported on a study in the upcoming April edition of the journal Intellectual and Developmental Disabilities showing that few parents plan for the future of their children with disabilities.  This is not be surprising considering the complexity of planning involved, and the lack of resources afforded these parents.  However, the end result is still the same as with estate planning in general: the person who knows the child and child’s needs best is leaving the future of their child up to someone who does not know the child.  In other words, future decisions are left to the court.

Deciding on residential placement, guardianship, preparing a special needs trust—parents need help navigating this overwhelming journey.  As a special needs planning attorney who prepares special needs trusts, my focus is on securing the financial future of a loved one with special needs without jeopardizing means-tested benefits, typically, Medicaid and Supplemental Security Income.  Planning is particularly important since many children with special needs are living longer, and outliving their parents.

There is more to planning for your child’s future than securing his or her financial future with trusts, however, if your child has a disability.  Where will your child live?  Who will be his or her caregiver?  There are many options available to explore, but knowing where to start is key.  My recommendation is to start with The Arc: For People with Intellectual and Developmental Disabilities.

To learn more, or if you would like more information on special needs planning, email me at julie@juliemillslaw.com.

Divorce–special considerations for when a child has special needs

Divorce with a special needs child–the special considerations that need addressed by divorcing parents, their attorneys, and courts could fill a book.  This much-shorter blog post will try to shed light on why this topic requires more careful attention.

Divorce is a difficult and painful process for everyone involved.  Parents must work out arrangements for custody, visitation, and child support.  Standard child support “tables” or calculations, and general “parenting plans” spelling out visitation, guide most divorcing parents in making their decisions.

“Standard” or “general” guidelines, tables and plans are to be assessed carefully, however, when the divorcing parties have a child with special needs.  A typical child support calculation, or standard visitation schedule, might be completely inappropriate for situations where a child has disabilities.  Why?

Visitation often includes alternating weeks, or weekends, where a child goes back and forth between parents’ homes.  For a child on the autism spectrum, for example, such a disruption in routine might be unbearable and ultimately unworkable.  Or, if a child with a disability requires durable medical equipment that cannot be transported, one parent might have to visit their child where the equipment is located—in his or her ex-spouse’s home.  The child’s interests must come first, and in these situations, working out visitation can be tricky.

Child support for a child on varying medicines, therapies and treatment programs that might not be covered by insurance cannot be calculated by standard tables.   Child support payments might need to be made to a special needs trust to avoid disqualifying the child from receiving means-tested benefits (typically, Medicaid).

Spousal support for a parent who gives up his or her career to care for a disabled child—a full-time job—takes on special consideration.  Division of retirement and marital assets must account for the parent who forfeited his or her earnings potential and social security credits to serve as caregiver for a disabled child.

This post mentions only a few of the myriad of issues that are presented with divorcing parents who have a child with a disability.  Parents, their attorneys, and courts need to assess what special needs exist, how to address what is needed, and how to incorporate those needs into visitation, custody, and child support.

If you are considering divorce and have a child with special needs, feel free to contact me with any questions at julie@juliemillslaw.com.

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.

7 reasons to review your estate plan now

  1. You have no estate plan!  I cannot think of a reason why any adult should not have at least a Last Will and Testament, durable power of attorney, and advance directives (healthcare documents: living will [do you want artificial life support?] and healthcare power of attorney).  If you die or become incapacitated without having any of these documents, state law controls what will happen, not you (through your documents) or loved ones.  This could cause unnecessary and unexpected costs, delays, and loss of privacy.
  2. If any of these have occurred to you or, if married, to your spouse: marriage, death, birth, divorce, second marriage. These occurrences call for a review of your estate plan.  Not reviewing your will and/or trust after any of these events could lead to unintended beneficiaries or fiduciaries.
  3. Speaking of fiduciaries…review the people you designate as fiduciaries in your documents, such as executor of your will, trustee of your trust, guardian of your children, agent in your powers of attorney, to name a few. Are they still alive?  Are they still capable of serving?  Do you still want them to serve?
  4. Review your beneficiaries. Review who you listed to inherit from you.  Are they still alive?  Do you still want to bequeath to them, or add additional beneficiaries?  You should definitely review life insurance and retirement plans and other assets that have beneficiary designations, since the person you name on such a designation will inherit regardless of what your estate plan states.
  5. Your current plan is more than a decade old. There have been many tax and other changes that could affect older plans, but a major change with my practice is that my clients now plan for their “digital assets.”  What happens to your pictures on Shutterfly, or your Facebook and LinkedIn accounts?  What happens to money in your etsy or ebay store’s PayPal account?  Do you want your spouse to have access to your Facebook account at your death?  Or your emails?  These “assets” should be reviewed, and you should consider what you want to happen to them at your death.
  6. Trust funding. There have been so many people who have created a trust plan but did not fund the trust, which meant at death the trust was useless.  You must fund a trust, which means you put assets into the trust—typically by re-titling or deeding assets from you personally, to you as trustee of your trust.  You can fund while living, or set it up so that this funding occurs at your death.
  7. Beneficiary becomes disabled. If a beneficiary has become disabled, or you wish to provide for a beneficiary who is disabled, then it is paramount that you discuss special needs planning, such as a special needs trust, with your attorney.  Leaving assets directly to a disabled beneficiary could jeopardize certain benefits they might receive, such as Medicaid.

If you would like to discuss your estate plan, contact me at julie@juliemillslaw.com.

STABLE accounts–savings accounts for people with disabilities

A child or adult with a disability can now save money without jeopardizing means-tested benefits with Ohio’s STABLE account.

“ABLE” accounts permit an individual with a disability to save money without having the savings jeopardize certain benefits such as Medicaid and Supplemental Security Income (SSI).  Historically, to receive Medicaid, SSI, and other benefits, you had to have a very minimal amount of savings, typically $1500-2,000.  Now, an eligible person with a disability can save money without worrying about losing these necessary benefits.  Ohio’s version of this special savings account is called a STABLE account.

STABLE account specifics:

  • STABLE accounts permit you to deposit up to $14,000 a year into an account that you choose from accounts with varying investment options.
  • To be eligible for opening a STABLE account, the person with a disability had to have onset of the disability prior to age 26.
  • Additionally, the person must be either entitled to SSI, or entitled to Social Security Disability Insurance (SSDI), or have a condition listed on the Social Security Administration’s “List of Compassionate Allowances Conditions,” or can self-certify (see website for requirements to self-certify).
  • You do not need to reside in Ohio to open a STABLE account—enrollment is open to eligible people nationwide.
  • A person with a disability can open their own account. A parent, legal guardian, or agent in a power of attorney authorizing actions with STABLE accounts can also open an account for an eligible person.

Contact me at julie@juliemillslaw.com with any questions.

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.