November 2022 Special Needs Living Akron/Canton

THE IMPORTANCE OF PLANNING. Jeff Hall Shares The New Trend Of Trust-Based Planning

PROFESSIONAL PERSPECTIVE: JEFF HALL, VP SENIOR TRUST OFFICER

When planning for a special needs family member, plans will typically only focus on how to leave assets to someone who is receiving government benefits. This approach looks past several basic concepts, including the incapacity of a caregiver. Special needs beneficiaries rely heavily on caregivers and guardians. Therefore, one of the important questions should be, what happens if those valuable caregivers themselves are no longer able to provide care? By examining this question, the importance of estate planning documents for a caregiver becomes evident.

Basic estate planning documents, including a power of attorney for health care, finance, and a document which details to whom the assets should be left are vital. Through these documents, a caregiver can dictate and make recommendations as to whom should step in and provide care should they be unable to do so themselves. Decisions and discussions around who will become the successor guardian are part of this plan. Additionally, who will coordinate financial support can be outlined in these documents. As a result, taking the time to consider caregivers and financial support planning ahead of time can alleviate extra stress on families should the unexpected arise.

Estate plans dealing with these complex situations too often focus on the ability to maintain government benefits. These benefits come in two primary forms: Medicaid and Social Security. It is important to note that while Medicaid and Social Security Income (SSI) benefits are means tested, Social Security Disability Income (SSDI) is not. The latter, instead, is based upon the amount of money a person has paid into the program during their lifetime and therefore does not dictate as much special planning as the other two benefits. Understanding eligibility and current benefits will play a large role in the appropriate plan.

Traditionally, when there was concern regarding benefits eligibility, the standard was to disinherit the beneficiary. Assets would then be left to a sibling or other caregiver with a wink and nod agreement that those assets would be used to support the beneficiary. However, this approach looks past concerns with changes in life and liability. If a person who has inherited the assets suffers a lawsuit, divorce or other creditor claim, those assets would be subject to the discovery process and available for satisfaction. In addition, once they are in a person’s name, their estate plan controls. Therefore, an unexpected death could result in assets being disposed of and no longer available for the beneficiary. The new trend is trust-based planning. There have been several types of trust used in this area of estate planning; today, the most popular tool is a wholly discretionary trust. Wholly discretionary trusts are codified to explain their requirements and allow assets to be set aside to supplement and not supplant other government benefits. These trusts require specific administration to maintain the benefits and must have clear discernable standards for distribution, and the trustee must maintain absolute discretion.

Based on the technical complexity of these documents, it is important to consider the best party to serve as trustee of these trusts. The best person to make decisions about the health and welfare of a beneficiary often are not the right fit for sophisticated trust and financial decisions. Considering a third-party independent trustee can create a sense of security and peace between beneficiary and caregiver, leaving a family with security knowing their loved one will be cared for both financially and physically.

At The Preferred Legacy Trust Company, our professionals have years of experience dealing with special needs trusts and planning and additionally a variety of other estate planning matters which a family may face. Our team understands that special needs situations are unique and may require their own distinct set of estate planning tools. It is important to understand that this type of planning goes well beyond the need for a trust or not and truly focuses on the beneficiary.