June 2020
The Rutkowski Report: Keeping Your Family Healthy, Wealthy and Wise

In This Issue

Without Your Own Estate Plan, the Government Will Make One For You! (What Could Possibly Go Wrong?)


Special Needs Planning Mistakes

Without Your Own Estate Plan, the Government Will Make One For You!
(What Could Possibly Go Wrong?)

On the most basic level, estate planning allows you to take control of your affairs. Without a plan of your own, you turn that control over to the government. It, not you, will make critical decisions that impact you, your family, and your legacy.


Let’s look at a few examples.


If a person passes away without a will or trust, his or her estate assets are distributed according to what is known as intestate succession. As a result, “who gets what” follows strict guidelines, set by the state, with no regard to the actual emotional relationships between you, your spouse, your children, and members of your extended family. What you would have wanted is irrelevant to the state. Your assets must be distributed, and the state has devised a formula to do so.


Another reason you need an estate plan of your own is to ensure that a person of your choosing has the authority to make medical and financial decisions on your behalf if you become incapacitated.


Without your own plan, the state will decide who can make decisions for you based on established guidelines. Or, someone might petition the court to gain control over your assets and medical care, and a judge will decide whether to grant that person’s petition. Either way, you will have no say in the matter without your own plan. The result? You may not receive the level or type of medical care you would have wanted. Conversely, you might be subjected to medical procedures you would not have wanted to keep you alive in an end-of-life situation. Similarly, financial decisions might be made about the management of your assets that you would never have taken on your own.


If you have minor children, you must also consider what will happen to them if something terrible happens to you and your spouse. An estate plan allows you to name people of your choosing—people you trust—to raise and care for your children if you cannot.


Without a plan, the court will decide who has control over your children. The court’s decision could lead to your children being raised in a place and manner you never would have wanted.


These are just some of the reasons to have your own estate plan. Depending on your particular needs and goals, your customized plan can:

  • Protect your assets against divorce, lawsuits, creditors, and other threats
  • Pass your work ethic, sense of responsibility, and values on to heirs
  • Reduce income, gift, estate, and other taxes
  • Avoid probate, thereby minimizing delays in the settlement of your estate and keeping your family’s financial information private
  • Protect your loved ones’ inheritances against a wide range of threats, including their own poor decisions if they are not yet mature enough to manage an inheritance on their own
  • Leave a lasting legacy

Seize control of your affairs and legacy with a customized, comprehensive estate plan of your own.

Special Needs Planning Mistakes

If you are caring for a loved one with special needs, you are no doubt concerned about what will happen to your loved one when you are no longer able to provide his or her care yourself. Special needs planning can help you obtain the financial assistance and care your loved one needs today as well as help ensure your loved one will receive proper care in the future. However, you’ll want to avoid the following mistakes in planning for your loved one’s future care.


Relying on Siblings or Other Family Members


Some parents believe their other children will provide long-term care for a brother or sister with special needs. Even if one of your children volunteers, and you provide the money to be used for special needs care, this approach presents a number of potential problems. The chosen sibling might suffer a financial setback, divorce, or lawsuit that limits his or her ability to provide necessary care. The sibling could become incapacitated, or pass away. In addition, the sibling might not provide the level of care the parents would have wanted. While relying on your loved one’s siblings to provide care might work temporarily, it is not an effective long-term solution.


Leaving an Inheritance in a Will


Leaving your disabled loved one an inheritance in your will could jeopardize his or her eligibility for vital programs like Medicaid or Supplemental Security Income (SSI). In addition, a will must go through probate, and probate is a public process. Anyone, including potential predators, could easily discover that your loved one has received an inheritance and exploit him or her for personal gain.


Using a "Cookie-Cutter" Trust


It is possible to find do-it-yourself special needs trusts online or from other sources. While such a trust might protect eligibility for benefits like Medicaid and SSI, this is by no means a certainty. In addition, some cookie-cutter trusts have inflexible distribution standards that limit the trustee’s ability to pay for services capable of maximizing your loved one’s quality of life. Finally, by their very nature, cookie-cutter trusts are not customized to your loved one’s specific needs.


Choosing the Wrong Trustee


Your choice of trustee to oversee your loved one’s special needs trust is obviously a critical decision. Many people choose family members or close friends to serve as trustee. However, special needs trusts are complicated, as is their administration. Mistakes can lead to your loved one losing his or her Medicaid and/or SSI benefits. Professional trustees, such as banks or trust companies, might offer a solution.


These companies have experience working with the numerous, ever-changing rules governing special needs trusts. Whoever you choose as trustee, it is essential that the trustee not only understands the many rules regarding means-tested government programs but is also familiar with your objectives and the specific needs of your loved one.


Inadequate Communication


Proper communication with relatives and close family friends about your loved one’s special needs trust will eliminate the problem of gifts going directly to your loved one and jeopardizing his or her government benefits. You should also create a Care Guide describing in detail the needs of your loved one. The Care Guide can be used by your loved one’s caregivers after you are gone.

Given the complexity of special needs planning and special needs trusts, it is important to speak with an estate planning attorney who has extensive experience in this area of the law.

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Rutkowski Law Firm. Visit our website at www.rutkowskilawfirm.com
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