Louisiana Estate Planning and Successions

Top 10 Estate Planning Tips Special Needs Clients

 
The Special Needs Alliance Newsletter, The Voice, shares a top 10 list for estate planning for families with special needs members. Read here for their excellent review of top tips.

Consider subscribing to their newsletter. It's a great resource!

Trustee Duties 101

A trust is an arrangement in which a person or institution (trustee) holds legal title to assets for the benefit of another person (beneficiary).  If you are asked to be the trustee of a trust, it's not only a great compliment in regard to your character and judgment, but also a huge responsibility.  The following are some general trustee duties.  The trust document may add to these duties. You must follow the trust document very carefully.

• Fiduciary Responsibility.  A trustee serves in a “fiduciary” role with respect to the beneficiaries of the trust.  This means that someone has placed a lot of faith in you and you are required to act in the best interest of the beneficiary even if that conflicts with your own interests.
• Investment Standards. You must act as a prudent investor.  Consider the interests of both current and future beneficiaries before deciding on how to invest the assets of the trust. 
• Distributions.  Consider the size of the trust and other beneficiary resources when making decisions on whether or not to make distributions to a beneficiary.
• Accounting, Taxes and Record Keeping.  Give an account of all income to, disbursements from and expenses by the trust on an annual basis (or as required by your state's law) to the beneficiaries.  You are responsible for seeing that necessary tax returns are filed. You should keep careful records of all transactions and never commingle your personal funds with trust funds.  You are usually allowed to hire accountants etc. to file tax returns or prepare an accounting.
• Fees.  Trustees are entitled to reasonable compensation for their services.  Although family members don't usually accept compensation, it is customary for institutions that manage trusts (banks, law firms, trust companies) to charge a percentage of the funds under management.

In conclusion, serving as trustee gives you an incredible opportunity to provide a great service to the trust’s beneficiaries.  The work can be very rewarding, but be mindful of the responsibilities described above to ensure that everything is in order.  If you have questions about serving as trustee, feel free to contact our office for help

Source for post: Elder Law Answers

How Much Money Should be in the Special Needs Trust?

If you are the parent or guardian of a special needs child, you want to ensure that your child will remain financially secure when you are no longer there to provide support. Your child likely has significant, ongoing expenses, and uncertain future expenses and public benefits. Determining how much a special needs trust should hold is a big challenge.

Fortunately, help is available from attorneys and financial planners with expertise in disability issues, as well as from special needs calculators, such as this online version provided by Merrill Lynch. The calculator asks a series of questions to help you plan, such as:

• The beneficiary's sources of income - salary, public benefits, investment income and legal settlements

• The beneficiary's expenses - housing, transportation, medical and personal expenses
• The beneficiary's life expectancy
• The parent or guardian's time until retirement
• Expected rate of return and inflation

The calculator then comes up with an estimated lump sum needed to fund the trust.

Once you have this estimate, you'll need to decide how to generate the funds. You may need to balance the interests of your special needs child with your other children and your own. Don't forget to create or update an estate plan and determine which of your assets you’ll leave to the trust. Also, advise relatives to direct gifts and bequests to the trust, rather than the child, to avoid the risk of disqualifying the child from eligibility for public benefits.

Source for post: Special Needs Answers from the Academy of Special Needs Planners, August 2007

Technorati Tags: Estate Planning, Trusts

Writing a Memorandum of Intent for Your Special Needs Child

Raising children is difficult in the best of circumstances. You’ve spent years learning every like and dislike of your special needs child and then it hits you – who will know this when I’m gone?

The answer is a Memorandum of Intent, which is a letter that you write to the guardian of your child. In it you can express things that might be considered too small or that change too frequently to include in your will or trust. Listed below are just a few of the items that might be included in a Memorandum of Intent:

• Healthcare and therapeutic needs
• Contact information for family friends, doctors, therapists, pharmacists, teachers, etc.
• Insights into your child’s personality - specifically the things that are unique
• Preferences for education, camp, child-rearing and religious upbringing
• Food preferences and any allergies
• Items or practices that might provide comfort
• Item or practices to avoid
• Holidays and traditions celebrated by your family

A memorandum of intent will provide for your child’s emotional well-being. It is the compilation of a level of knowledge that you would only know by spending everyday with someone you love. This thoughtful information will help ease the transition for all involved when you are no longer available to care for your child.

Source for Post: The Academy of Special Needs Planners. Read the article here.

Special Needs Trusts for Children Under 18

Parents of children with special needs usually don’t consider creating a special needs trust until their child turns 18.  But special needs trusts are versatile instruments that can do a lot more than simply protect a person’s access to government benefits. Here are some reasons not to wait:

• Estate Planning.  The primary reason in creating a special needs trust before a child’s 18th birthday is the same reason parents of children without special needs should have an estate plan – to provide security and stability for family members should something happen to them.  If parents of a child with special needs pass away unexpectedly, an active special needs trust will allow the estate to be held for the benefit of the child with special needs in a way that offers maximum flexibility for the child.
• Gifts.  Parents may want to consider establishing a special needs trust for their minor child so that relatives can fund the trust with gifts. Older relatives planning to leave an inheritance for a child with special needs may give the bequest directly to the trust.
• Life Insurance.  Parents of a child with special needs may want to buy a life insurance policy that will help pay for their child’s care after they are deceased.  Special needs trusts can hold life insurance policies and manage the proceeds from those once the parents have died.
• Home Ownership.  Special needs trusts can also own homes, decreasing the risks of placing property responsibility in the hands of someone who may not be able to  properly maintain a home.
• Care Management.  Special needs trusts can provide specific care instructions as well as the arrangement of family involvement in the daily activities of a person with special needs.  In addition, experienced special needs trustees can assist families looking for additional care options for their children.

Planning early and frequently updating and improving a special needs trust can be the difference between a fairly useful trust and a highly effective one.  In most cases, the trust will be unfunded during the lifetime of the parents, regardless of the child’s age. But having the trust available is a valuable planning technique.

Source for Post. Academy of Special Needs Planners, Special Needs Answers.

Special Needs Trust Issues: Commingling Funds

A recent case from Rhode Island portrays how easy it can be for untrustworthy people to steal from a trust created to benefit a child with special needs.  Matthew Goodness was born with cerebral palsy and later obtained a deferred annuity as a partial settlement of a lawsuit.  The payments started on Matthew’s 18th birthday.  They were deposited into a trust for special needs created by his parents, Mary and Francis Goodness, for his sole benefit.  His parents were assigned as the co-trustees of the trust, and Fleet Bank (now Bank of America) was appointed as successor trustee.

By the time Matthew started receiving the annuity payments, his parents were separated and seeking a divorce.  Mary and Francis began withdrawing money from Matthew’s trust and putting the funds into their separate personal bank accounts.  While Mary used trust fund money to buy groceries and pay rent, Francis spent the funds he took on beer.  Although Matthew’s essential living expenses were paid for, neither parent coordinated his care with the other.  Eventually both Mary and Francis asked the court to remove the other as a co-trustee.  After a hearing, the Rhode Island Superior Court ousted both Mary and Francis as trustees and appointed Bank of America as the successor.  The court concluded that both parents “(1) breached their duty of loyalty to the Trust; (2) impermissibly comingled Trust funds with their personal funds; (3) wasted and depleted Trust fund assets; and (4) breached their fiduciary duty to the Trust.”

The Goodness case serves as a drastic example in commingling trust funds with personal assets, and should alert reliable parents who are the trustees of a special needs trust.  Trustees have a “fiduciary duty” to administer a trust in the best interests of the beneficiary. Key to successfully managing a trust of any nature is the separation of trust assets from the beneficiary’s and the trustee’s personal property. One who takes funds designated for the beneficiary and uses them for himself without approval is not only violating his fiduciary duty, but also stealing.  Common solutions to this problem are to appoint an independent trustee to serve alongside a family member trustee or establish a committee of trust advisors to monitor the trustee.  The trustee must remember to keep the best interests of the beneficiary at heart and to work with a qualified special needs planner to monitor and supervise the trust.

To read the opinion, click here.

Source for Post: Academy of Special Needs Planners

Trust Basics

Trusts are a popular and very flexible estate planning tool, but many don't understand basic trust concepts. Here is a simple discussion.

What is it? A trust is an agreement between the person who creates the trust (called donor, settlor or grantor) and a person that manages the assets in the trust (the trustee) for the benefit of a third party (the beneficiary).

Trust Assets The trust can contain almost any type of asset such as cash, stocks, bonds and real estate. Assets are transfered "into the trust", which basically means that the ownership of the assets changes to the trustee. Assets may be transfered by way of deeds (in the case of real estate) or registering the account in the name of the trustee (in the case of bank account).

What does the trustee do? The terms of the trust will detail the powers and duties of the trustee, but generally the trustee's duty is to manage the assets for the benefit of the beneficiary. For example, the trustee might make investment decisions on behalf of the beneficiary.

Types of Trusts
Trusts fall into two main categories: revocable and irrevocable. A revocable trust can be changed or revoked by the settlor; whereas an irrevocable trust cannot be modified or revoked. Within those broad categories, there are many types of trusts. A few examples:

• Living Trust - created while the settlor is alive
• Testamentary Trust - created in the settlor's will and effective upon her death
• Special Needs Trust - created for to provide for supplemental needs of a disabled person
• Charitable Trust - allows the settlor flexibility in making donations to charity

Why Use a Trust?

• You have young children and don't want them to squander their inheritance. A trustee can manage the assets for your children, paying school tuition, etc. until they are old enough to manage the assets themselves. You decide at what age they get the assets.
• Your spouse is not a sophisticated business person and you are afraid for them to manage the assets on their own.
• You have a disabled child currently receiving government benefits. You want your child to continue getting benefits, but would like to provide the child with extras such as additional therapy, a vehicle or a computer system.

ABC's of Special Needs Trusts

What is it?

The special needs trust or SNT is a trust designed make resources available to a disabled person while maintaining the individual's eligibility for public assistance benefits.

Why is it needed?

Here is an example. Cathy is special needs teenager. She and her family rely upon government benefits to make ends meet. Her grandmother dies leaving her an inheritance with the wish that it will help Cathy live a better life. The inheritance is a modest amount, but enough money so that upon receipt, Cathy no longer qualifies for government benefits. Cathy spends her inheritance on medical and other bills until it is depleted. Later, she may re-qualify for benefits, but her grandmother's intention is thwarted. This result could have been avoided with a SNT. Cathy's grandmother could've established such a trust to take care of Cathy's supplemental needs while still retaining government benefits for her basic needs for food, clothing and shelter.

Some Characteristics of an SNT

• Established by a grandparent, parent, court, or guardian
• For the sole benefit of the disabled person
• Provides for the supplemental needs of the disabled person - it adds to the benefits provided by the government benefit program
• Managed by a trustee with absolute discretion over distributions