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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School shootings: helping students with disabilities prepare

The title of this post is so disheartening.  The school shooting in Florida has schools assessing their security plans and emergency drills, which has become as necessary today as huddling in the hallway for tornado drills was when I was in school.  Schools are required by federal law to have emergency plans for students and staff with disabilities.  The best way to ensure that your school has an emergency plan for your child is to advocate for it.

My elementary-age child’s classroom practiced “The Sheep, The Shepherd and The Wolf” emergency drill.  The sheep are the young students, the shepherd is the teacher guiding them, and the wolf–the wolf is an active shooter who the teacher instructs the sheep to “stay out of the wolf’s way!”  This method of preparing for an active shooter is used to instruct young children in a non-threatening way.  Elementary children obviously cannot handle information about an active shooter drill that might be given to high school students.

As schools tailor emergency plans for students according to their development stage, the same tailored plans must occur with students with disabilities.  How will pulled fire alarms, shouting, shooting and other paralyzing noises affect a child with autism?  Or a child who cannot hear or see?  Would a child with developmental delays understand emergency instructions?  Plans for the most vulnerable should be tailored to individual needs, and practiced often.

This article in the Washington Post, “How can we prepare our kids with special needs for a school crisis” provides clear advice on ensuring that your child is included appropriately in emergency plans.  Among much advice, the article suggests:

  • Ask your school district about how they include students with disabilities in emergency plans (required by federal mandate).  Here is a sample plan.  In Ohio, school emergency management plans are not public record but discussions can and should happen.
  • Talk with the administrators in your child’s building about your child and their plan for your child, specifically.  If your child uses a wheelchair, are there steps to get outside at the door nearest your child’s room, and how will your child get outside?
  • Include instructions in your child’s IEP or 504 plan detailing what help your child will need in an emergency.  Make sure your child’s teachers are aware of what help your child will need.  This “Teacher’s Emergency Plan Procedural Checklist” should be provided to your child’s teachers.

Schools are required to have emergency plans for students with disabilities, but the best way to help protect your child with special needs is to make sure there is a plan in place that is tailored to your child’s needs, and known by teachers and administrators.

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

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.

“Teachers want copies of my child’s IEP–what about confidentiality?”

A parent was concerned that several of her child’s teachers wanted copies of the child’s IEP.  She felt that confidentiality regarding her child, his disability, and his education plans would be jeopardized.  “Are teachers entitled to copies?”

Yes.  And, common sense dictates this even if the law did not, as long as everyone understands their legal obligations.  The law states that teachers, related service providers, and others responsible for implementing the IEP should have easy access to it.  How else are they to know what needs implemented if they do not know what is needed?  I suggest giving copies of your child’s IEP to the teachers and service providers.

“But what about confidentiality?”

The school is responsible for instructing all staff who have access to IEPs regarding their legal obligation to maintain confidentiality of student records, and student information.  Personally-identifiable student information cannot be disclosed to anyone without obtaining parental consent.

Student records privacy is covered by FERPA: Family Educational Rights and Privacy Act.  It provides an array of protections for maintaining confidentiality of student records and information.  Most relevant to parents, in my opinion, is what I mentioned above, i.e., personally-identifiable information.  This information must be kept confidential and includes, but is not limited to:

  1. The student’s name
  2. The name of the student’s parent or other family member
  3. The address of the student or student’s family
  4. A personal identifier, such as the student’s social security number or student number
  5. A list of personal characteristics that would make the student’s identity easily traceable; or
  6. Other information that would make the student’s identity easily traceable.

Schools, under FERPA, can release certain directory information to others without violating FERPA.  “Directory information” generally includes information that, if released, is not considered harmful or an invasion of privacy.  The U.S. Department of Education has listed directory information to include:

  1. Name
  2. Address
  3. Telephone listing
  4. Date and place of birth
  5. Participation in officially recognized activities and sports; and
  6. Dates of attendance

What differentiates two seemingly-similar lists is the use of the information.  Directory information is what you see in yearbooks, school directories, and other publications where there is generally no harm or invasion of privacy if released.

If you have questions have your child’s IEP, confidentiality, or FERPA, contact 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.

When should I update my estate plan?

An estate plan consists of a last will and testament, possibly a trust, along with additional documents necessary for situations involving incapacity or death.  Additional documents can include a financial power of attorney, advance directives (living will for end-of-life decision making, and a healthcare power of attorney), and a funeral declaration, among other documents.

You should review your estate plan every five years to see that it still reflects your wishes.  However, if any of the following occur, then you should review your estate plan sooner:

Marriage: if you get married, or particularly if you get re-married, you need to review your estate plan.  If you are married and die without a will, state laws of “intestacy” (dying without a will) might not result in a distribution of your assets as you would want.  Furthermore, divorce and re-marriage do not automatically remove your ex-spouse from existing documents.

Children (birth, adoption or marriage):  the critical reason for reviewing an estate plan after you add a child to the family is to name a guardian who will care for your child should you (and your spouse, if married) die.  This is not a decision that should be left to a judge you do not know.  Another reason is to direct assets to provide for your child if you are gone.

Divorce: many states have laws that treat ex-spouses as having “predeceased” their divorced spouse in certain situations with some estate planning methods.  It is best to not assume that such a law will pertain to your documents. Part of your divorce or dissolution journey should include an estate plan that removes your ex from your documents.

Death of a spouse: if a spouse dies, you want to be certain that you have successors listed in estate planning documents, and you want to update deeds and titles to property.  For example, if you have a financial power of attorney and your spouse is the only person you named to serve as agent, you will need to update this document with the names of others.  If you owned property jointly with your spouse, you will need to remove your spouse’s name if you intend to convey that property (you’ll need to have a new deed prepared to your home).

Change in assets:  when you acquire assets, you should ensure that your estate plan addresses where those assets will go upon your death.  If you have 8 acres that your two children will inherit and plan to divide equally, and then acquire 5 more acres, who will inherit the 5 acres if you do not specify it in your estate plan?

Relocation:  most estate plan documents are valid in other states if you move, as long as the documents were executed properly in the state where you lived when they were prepared.  There are special considerations in some instances, however, when you move.  For example, if you move from a community property state to a common law property state, or vice versa, then you should definitely have your current estate plan reviewed by an attorney in your new state.  Additionally, bond might be required for out of state executors and others, so you might consider choosing in-state people to serve in these fiduciary roles.

Change in status of guardian, trustee or executor:  did the person you named as the guardian of your child die?  Move to Europe?  Become incapacitated?  The same consideration is valid for an executor or trustee.  If yes, consider reviewing your documents to remove them and replace with alternatives.  Perhaps after you named your cousin to serve as the guardian of your three children, she has had four children—would she be able to care for seven children?  After you named your brother to serve as guardian of your child, he started a career where he travels more than he is home—would that be a suitable situation for your child?

Your estate plan reflects your wishes for the way everything will be handled at your death, and designates certain people to carry out those wishes.  Both the plan, and the people designated in the plan, should be current.

Contact me at julie@juliemillslaw.com to discuss reviewing and updating your estate plan.