Vision for the Future: Legal Elements 001
This is the fifth installment in a number of articles which are based upon my book Special Needs Planning: A Simple Guide for Families in New York with a Loved One with a Disability published by Graylake Publishing and released in October, 2014. The book is a response to inquiries from family members and those who support them about how best to provide for a loved one with a disability. While my primary focus is the legal aspects of the process, I have realized in my work that the process for providing a secure future for a loved one is far broader in scope. In this installment and the next two, I will explore the third element of a "Vision for the Future."
The third element of envisioning the future is a legal plan. A care giver should seek a recommendation from the "circle of support" for the name of a qualified attorney to assist with the legal plan. Not every practicing attorney is familiar with the laws, rules and regulations affecting the life of person with a disability. The attorney retained by a care giver should have a working knowledge of the eligibility rules for SSI, Medicaid and other government benefits; trusts, including specifically Supplemental Needs Trusts; estate planning; estate administration; and tax law.
The legal plan involves at least three documents, and perhaps more. For each of the care givers there will be a Will or "Living Trust," a Health Care Proxy and a Power of Attorney. A "Living Trust" deals with the care giver's property during life and at death. The Will covers contingencies at the care giver's death while the Health Care Proxy and Power of Attorney deal with events during the life time of the care giver.
1. Living Trust - A "Living Trust" is formally known as an Inter Vivos Revocable Trust because it is created by a person (called the "Grantor") during his or her lifetime (i.e., “inter vivos”) and it can be amended or even terminated by the Grantor. It names a "Trustee," who may or may not be the same person as the Grantor, to manage the property in the Living Trust. The Living Trust is established for the benefit of a "Beneficiary," who generally is the Grantor during his or her lifetime and their children at death. A Living Trust is a popular Estate Planning device to avoid probate and to maintain privacy. More importantly, it can maintain continuity of asset management in the event of the incapacity of the Grantor. A Living Trust provides for management of the Grantor's property during life and distribution of that property at death. In Special Needs Planning, the Living Trust serves as the vehicle to establish a Supplemental Needs Trust to take effect at the death of the Grantor.
2. A Will - A Will is a document which takes effect at the death of the maker. It serves four important functions: (i) it names an Executor; (ii) it names a guardian of minor children; (iii) it establishes trusts (and names trustees) to complete the maker's Estate and Special Needs Planning; and (iv) it disposes of the maker's worldly possessions. Trusts contained in a Will, such as a Supplemental Needs Trust, are called "testamentary" trusts and take effect at the death of the maker of the Will.
3. Supplemental Needs Trust - A care giver has three choices when considering the future of a loved one with a disability: disinherit the loved one; give the legacy to a close relative with the hope that the close relative will "take care" of the loved one with special needs; or establish a Supplemental Needs Trust (a "SNT"). From my perspective (for reasons discussed in my book) the only option available is to establish a SNT. SNT's are established for the benefit of the loved one with a disability (called the "Beneficiary"), who is the sole lifetime beneficiary of the SNT. SNT's established by a care giver are called "third party" SNT's, because someone other than the Beneficiary (a "third party") contributes money to the SNT. Properly drafted and funded, amounts in the SNT are disregarded for purposes of eligibility for Medicaid, SSI and other government benefits. One of the main functions of a SNT is to enhance the quality of life for a Beneficiary by providing for the purchase of additional support, services, therapies and other items that are not covered by nor provided adequately for by available government programs. Like all trusts, a SNT is a written agreement between the Grantor (generally the care giver) and a Trustee which charges and authorizes the Trustee to manage the assets in the trust and to distribute them to the Beneficiary (i.e. the loved one with a disability) during his or her lifetime.
In the next installment of this Newsletter I will explore the documents needed to handle the legal affairs of a care giver during his or her lifetime.