Has anyone done this? Any suggestions? It seems confusing.
It seems like a good idea to also set up a Realty Trust, because we have a second home. The attorney explained that you get an exemption for your primary home when you’re trying to get into a nursing home under Medicaid, but there is no exemption for the second home.
We need to set up a trust because of our disabled son. If he just inherited money directly from us, he would lose his eligibility for Social Security and Medicaid. If we would put money in his ABLE account, he can keep it for now but it would go to the state once he passes away.
The attorney said we should also consider what would happen if I pass away before my parents. My share of my dad’s estate would pass on to my three kids, and that would also impact my son’s eligibility for SS.
Sigh. So much to think about. We met with the lawyer yesterday, and he said, “You should plan as if you were going to pass away tomorrow.” And then we went home and saw all the Facebook memes about the 3,000 people on 9/10 not realizing it was their last day on earth.
We have a revocable living trust. The only PIA piece for us was having to put the trust as beneficiary for all our policies, and the house is titled in the name of the trust. Everything else the attorney took care of. It was more costly to set up but it will avoid probate fees after we die.
It sounds like your situation is complicated though so I would maybe suggest getting a second legal opinion for the best way to provide for your son.
We have several. I would advise working with both a CFP and a lawyer to set this up. Every situation is different, and you want someone who knows your entire financial picture to work with your lawyer to make sure all bases are covered.
I’d sit down with the grandparents before I did anything to understand what their estate plan looks like. And although it’s awkward- try to understand if your share is 5K, 50K, 500K or more. A lot of people spend time and money when the impact of the inheritance isn’t big enough to gyrate about.
Then I’d get a second opinion from a lawyer experienced in dealing with the disabled.
My parents set up a Medicare Asset Protection Trust. I know with that, there was a timeline with a certain percentage protected at the beginning, gradually increasing for a set period (10 years, if I remember correctly). I am an only child and sole beneficiary and trustee. Your situation sounds far more complicated and I agree with getting another legal opinion because things vary from state to state. My neighbors needed to do something similar because their son has a more severe form of autism. They wanted to make sure his long term needs were met without compromising his benefits.
It is uncomfortable to think about but I think the piece of mind in the end outweighs the grimness of the discussion. It is better to have a well thought plan that honors your wishes than leave your kids and/or their guardians scrambling. Good luck to you!
There is such a thing as a Special Needs Trust. Your attorney should have suggested this. Several of my friends did it, although I haven’t asked about details. Another good source, although watch out for over selling, is to go to a financial place that handles trusts and ask what happens. It helped us a lot and we did use that bank as our trustee when the kids were small. Schwab also has a trust department and if you already have an account it is easy to talk to them.
All I can say is that my Mom’s trust was a wonderful wonderful gift from her to us for cleaning up the messes she had made while demented and for managing assets whil she lived. It has been two years since she passed away and we are still cleaning up and selling property, but management with the trust makes it much easier.
We have a Special Needs Trust for S2, which will be funded by a life insurance policy that I carry on me (trust is the beneficiary). D1 and S1 are the trustees (executors). S2 will ultimately live with D1, S1 as backup. He also has a MiAble acct.
Our estate plan has trusts for H and I. Multiple items in each. Our plan also divides our assets equally between S1, D1, D2. S2 will be funded by his trust (recommended by lawyer) so no share for him. Because there are 12 years between S1 and D2, we have set it up for each child to receive 1/3 at 25, 28, 31. If D2 is not 25, she has some money available before the splits to cover post HS schooling, wedding, living expenses until 25. S1 is the executor.
It’s all pretty complicated, but I think the plan will greatly help our kids when we are gone. My parents did the same, and it made my job very easy, though time-consuming, when they both had passed away.
We used a lawyer who specializes in estate planning. She’s part of a large firm and they have financial advisors/consultants as part of their group.
@MaineLonghorn , these are definitely more complicated issues than can be dealt with well on a message board like this.
People use trusts to deal with a whole variety of different issues, and they really aren’t one-size-fits-all. Some are for tax planning, some for avoiding probate issues, some for protecting loved ones from their own profligacy, some are for protecting assets from vicious creditors (like an evil son- or daughter-in-law who is just waiting for you to pass away to file for divorce). Or all of the above.
There are trusts designed to ensure that the trust’s grantor will qualify for government benefits without depriving her children of an inheritance, and trusts designed to ensure that the beneficiary will continue to qualify for government benefits without the government taking the trust assets as reimbursement. That last is a so-called third-party Special Needs Trust. It’s a great tool in some situations, but not so great in others. It depends on your child’s capacity and needs, and also on the resources you can make available.
@JHS, oh, I know there’s a lot to to it. I just wanted to hear people’s ideas. The attorney listed all the possibilities on paper for us. He asked lots of questions about our family’s financial standing and special circumstances.
I always feel like I don’t even know what questions to ask the lawyers. Our kids needs thankfully are simple, what’s complicated is how many bit of land we own. Most of it shared with other relatives.
I was financial POA for a friend with a rare disease, and supervised her spend down for long term care. The Special Needs Trust set up with cash post divorce was amazingly helpful. The person I shared duties with found an attorney who dealt with disability issues who gave very good advice and set up the trust. Despite my friend doing a spend down, there were funds for new wheelchairs, a private room, clothing, and potentially enriching activities. Sadly, she passed away before we did much of what we had planned. After she passed away, I think the state was repaid for some of the long term care money, and family was able to inherit the rest.
The sad part is that my friend so resented her money being out of her immediate control, that my joint POA ended up distancing herself from the relationship. Doing the right thing does not always make the path smoother.
My mother is in the position it sounds like you are in @MaineLonghorn . She has a D that has special needs and can not inherit or even have in a bank account greater than $2,000. She created a trust which divides her assets among her other children but nothing to my sister. She has toyed with the idea of a special needs trust but we have all agreed that, instead, she will set aside funds for my other siblings and me that we will use to provide for our sister. This particular arrangement is what my mother wants and what we have all agreed to; I certainly understand that it might not be the right option for others. If anything changes, she will create a special needs trust.
Also, she was very concerned that her ex would leave something to my sister upon his death. She spoke with him many times but he wouldn’t acknowledge her concern. He passed a couple years ago and, fortunately, he did not. Hopefully you can work with your father to see if he can change his documents to protect against your son from the pass through.
It does sound like you have options and an attorney with some good advice. Good luck figuring out what’s best for you and your family.
That would require a great deal of (deserved) trust. Your sister is so lucky that her siblings are willing and up to the task. I and my brother would do the same-one of my sisters could not be counted on. This kind of thing always reminds me of the opening scenes of Jane Austen’s Sense and Sensibility. The son makes a deathbed promise to his father that he will take very good care of his sisters/stepmother. Then as time goes by (and with the constant harping of his devious wife), the definition of “very well” evolves and evolves, not in the direction the father had intended.
My ill son loves his siblings but told me straight out he is not comfortable with them managing his financial affairs. Of course, he’s thinking of them as “kids” at 21 and 24. So that’s why we’re going to honor his feelings and set up trusts with a close friend as the trustee. The attorney said we can revisit the setup every five years and change the trustee to be one of the kids when we think he/she is ready for the responsibility.
@blossom, I hope the woman I have in mind is willing. She has an older sibling in a nursing home that she’s responsible for. She may feel like this would be too much for her. Realistically, she wouldn’t need to help my son until long after her brother has passed, but I know it’s still a lot to ask.
Please make sure you understand what is required in your state to replace the trustee. I’ve just been through the process in California, with a trustee who didn’t want to let go. Feet were dragged to the bitter end, over 8 months after the resignation/retirement notification letter was sent to us. (The last 3 week’s or so were waiting for a $25 check to clear.)
We had a lot of other issues with our trustee that got us to that point, but very much still worth being crystal clear in your understanding. It’s been such a weight off my shoulders to have a (new) trustee who will communicate with me (and my siblings).
Maine- worth asking. At some point when we were revising our wills, I was tied in a knot (and had a few sleepless nights) over guardianship. Lawyer wasn’t being helpful. Complicated family situation- you know the drill.
One day we had a meeting set up to finalize- everything was done EXCEPT for the guardianship. Our lawyer was in court- so we met with one of the other attorneys in the practice who we’d heard good things about but had never met. He asked why I was vacillating on the guardian- and I told him that my key concern was that this person was guardian for a special needs nephew, trustee for a sibling with a substance issue, had taken on a foster kid who was not a relation but had nowhere else to go, etc. (and those were the only situations I knew about). The lawyer looked me in the eye and said “Do you want someone who steps up to the plate, or someone who is going to try and figure out how to weasel out of it, or do a third rate job raising your kids?”
He was right, we finished the wills, and that was that. Such clarity. There are certain people in the world who step up to the plate, do the right thing, carry the load… and other people who grimace and phone it in.
Hugs to you. This must be very challenging for you to try and predict the future AND do right by all your kids…