Category: Trustee

Estate planning for special needs children

Estate Planning for Special Needs Children

Part of providing comprehensive estate planning for families includes being prepared to address the needs of family members with special needs. Estate planning for special needs children comes with its own set of challenges. Some of the tools used are trusts, guardianship and tax planning, according to the article “How to Help Clients With Special Needs Children” from Accounting Web. Your estate planning attorney will be able to create a plan for the future that addresses both legal and financial protections.

A survey from the U.S. Department of Health and Human Services revealed that 12.8 percent of children in our country have special health care needs, while 20 percent of all American households include a child with special needs. The CDC (Center for Disease Control) estimates that 26% of adults in America have some type of disability. In other words, some 61 million Americans have some kind of disability.

Providing for a child with special needs can be expensive, depending upon the severity of the disability. The first estate planning step for families is to have a special needs trust for your children, created through an estate planning attorney with experience in this area. The goal is to have money for the support and care of the child available, but for it not to be in the child’s name. While there are benefits available to the child through the federal government, almost all programs are means-tested, that is, the child or adult with special needs may not have assets of their own.

For many parents, a good option is a substantial life insurance policy, with the beneficiary of the policy being the special needs trust. Depending on the family’s situation, a “second to die” policy may make sense. Both parents are listed as the insured, but the policy does not pay until both parents have passed. Premiums may be lower because of this option.

It is imperative for parents of a child with special needs to have their estate plan created to direct their assets to go to the special needs trust and not to the child directly. This is done to protect the child’s eligibility to receive government benefits.

Parents of a child with special needs also need to consider who will care for their child after they have died, and have this clearly stated in their estate plan. A guardian needs to be named as early as possible in the child’s life, in case something should occur to the parents. The guardianship may end at age 18 for most children, but for an individual with special needs, more protection is needed. The guardian and their role need to be spelled out in documents. It is a grave mistake for parents to assume a family member or sibling will care for their child with special needs. The need to prepare for guardianship cannot be overstated.

The special needs trust will also require a trustee and a secondary trustee, if at some point the primary trustee cannot or does not want to serve.

It may seem easier to name the same person as the trustee and the guardian, but this could lead to difficult situations. A better way to go is to have one person paying the bills and keeping an eye on costs and a second person taking care of the individual.

Planning for the child’s long-term care needs to be done as soon as possible. A special needs trust should be established and funded early on, wills need to be created and/or updated, and qualified professionals become part of the family’s care for their loved one.

Having a child with special needs is a different kind of parenting. So estate planning for special needs children will also be different. A commonly used analogy is for a person who expected to be taking a trip to Paris but finds themselves in Holland. The trip is not what they expected, but still a wonderful and rewarding experience.

If you would like to read more about special needs planning, please visit our previous posts. 

Reference: Accounting Web (Sep. 13, 2021) “How to Help Clients With Special Needs Children”

The Estate of The Union Episode 9 out now

 

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pot trust gives you added flexibility

Pot Trust gives you added Flexibility

A pot trust gives you added flexibility as to the way in which the trust assets are used, if you plan to leave your entire estate to your children, says Wealth Advisor’s recent article entitled “How Does a Pot Trust Work?” It’s also called a discretionary, sprinkling or common pot trust and is a type of trust that can be used by families to pass on assets. Minor children serve as beneficiaries with a trustee overseeing the management of trust assets. The trustee has discretionary power to decide how the trust funds are used to pay for the care and needs of beneficiaries.

Flexibility is key in family pot trusts, since the assets are distributed based on the children’s needs, rather than setting specific distribution rules as to who gets what. You might consider this type of trust over other types of trusts if: (i) you have two or more children; and (ii) at least one of those children is a minor. As long as the trust is in place, the trustee determines how trust assets may be used to provide for the beneficiaries’ well-being. This trust is designed to address the financial needs of individual children as they arise, and there’s no requirement for trust assets to be divided equally among them.

Pot trusts can give flexibility to parents who want to make certain the needs of their children will be met in the event something happens to them. If both parents were to die, a pot trust could provide money to cover basic living expenses, as well as other costs that might arise. You can decide when the trust should end, based on the ages of your children, if ever. Children can also still get distributions from the trust once it terminates, if all trust assets haven’t been used.

However, pot trusts don’t ensure an equal distribution of assets among multiple children. A family pot trust can also put an increased burden on the trustee because the trustee must in effect assume a parental role when it comes to financial decision-making. There’s no predetermined set of instructions left behind by the trust grantor.

However, if you’re worried about issues of fairness or older children having to wait to receive trust assets, ask an experienced estate planning attorney about creating individual trusts instead, so that you can designate specific assets to be added to each trust and provide instructions to the trustee on how those assets should be managed. An individual trust gives you more control over what happens with the trust assets. You can also say what portion of your estate each child should receive.

A pot trust will provide the flexibility you want, but still requires careful consideration as you distribute assets amongst your family. Work with you estate planning attorney to ensure this type of trust is the right option for you. If you would like to learn more about different types of trusts, please visit our previous posts.

Reference: Wealth Advisor (Aug. 31, 2021) “How Does a Pot Trust Work?”

 

benefits of a charitable lead trust

Which Trust Is Right for You?

Everyone wins when estate planning attorneys, financial advisors and accounting professionals work together on a comprehensive estate plan. Each of these professionals can provide their insights when helping you make decisions in their area. Guiding you to the best possible options tends to happen when everyone is on the same page, says a recent article “Choosing Between Revocable and Irrevocable Trusts” from U.S. News & World Report. Which trust is right for you?

What is a trust and what do trusts accomplish? Trusts are not just for the wealthy. Many families use trusts to serve different goals, from controlling distributions of assets over generations to protecting family wealth from estate and inheritance taxes.

There are two basic kinds of trust. It can be difficult to know which trust is right for you and your family situation. There are also many specialized trusts in each of the two categories: the revocable trust and the irrevocable trust. The first can be revoked or changed by the trust’s creator, known as the “grantor.” The second is difficult and in some instances and impossible to change, without the complete consent of the trust’s beneficiaries.

There are pros and cons for each type of trust.

Let’s start with the revocable trust, which is also referred to as a living trust. The grantor can make changes to the trust at any time, from removing assets or beneficiaries to shutting down the trust entirely. When the grantor dies, the trust becomes irrevocable. Revocable trusts are often used to pass assets to adult children, with a trustee named to manage the trust’s assets until the trust documents direct the trustee to distribute assets. Some people use a revocable trust to prevent their children from accessing wealth too early in their lives, or to protect assets from spendthrift children with creditor problems.

Irrevocable trusts are just as they sound: they can’t be amended once established. The terms of the trust cannot be changed, and the grantor gives up any control or legal right to the assets, which are owned by the trust.

Giving up control comes with the benefit that assets placed in the trust are no longer part of the grantor’s estate and are not subject to estate taxes. Creditors, including nursing homes and Medicaid, are also prevented from accessing assets in an irrevocable trust.

Irrevocable trusts were once used by people in high-risk professions to protect their assets from lawsuits. Irrevocable trusts are used to divest assets from estates, so people can become eligible for Medicaid or veteran benefits.

The revocable trust protects the grantor’s wishes, if the grantor becomes incapacitated. It also avoids probate, since the trust becomes irrevocable upon death and assets are outside of the probated estate. The revocable trust may include qualified assets, like IRAs, 401(k)s and 403(b)s.

However, there are drawbacks. The revocable trust does not provide tax benefits or creditor protection while the grantor is living.

Your estate planning attorney will know which trust is right for your situation, and working with your financial advisor and accountant, will be able to create the plan that minimizes taxes and maximizes wealth transfers for your heirs. If you would like to learn more about the different types of trusts available, please visit our previous posts. 

Reference: U.S. News & World Report (Aug. 26, 2021) “Choosing Between Revocable and Irrevocable Trusts”

New Installment of The Estate of The Union Podcast

 

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The Estate of The Union Episode 10 out now

New Installment of The Estate of The Union Podcast

In this new installment of The Estate of The Union Podcast, Brad Wiewel is joined by Ann Lumley, JD, the Director of After Life Services and Trust Administration for Texas Trust Law to discuss celebrity estate planning screw ups.

The size and scope of the mistakes made by celebrities may be enormous, but many of the mistakes are common for, well, us common people. Ann and Brad discuss the havoc created by celebrities when they died with no planning or inadequate planning. It’s a fun, fast moving discussion on What-Not-To-Do. Learning lessons from celebrity estate planning mistakes is a good way to prevent yourself from making those same errors. If you don’t have an estate plan, get it started. If you haven’t looked at your estate plan in a while, have it reviewed.

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insight into estate planning, making an often daunting subject easier to understand.

It is Estate Planning Made Simple!

The Estate of The Union can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. Please click on the link below to listen to the new installment of The Estate of The Union podcast. We hope you enjoy it.

Episode 8 of The Estate of The Union podcast is out now

The Wiewel Law Firm focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. 

Consider an estate planning checklist

Consider an Estate Planning Checklist

We know why estate planning for your assets, family and legacy falls through the cracks. It’s not the thing a new parent wants to think about while cuddling a newborn, or a grandparent wants to think about as they prepare for a family get-together. However, this is an important thing to take care of, advises a recent article from Kiplinger titled “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date? Consider maintaining an estate planning checklist to keep your planning current.

Every four years, or every time a trigger event occurs—birth, death, marriage, divorce, relocation—the estate plan needs to be reviewed. Reviewing an estate plan is a relatively straightforward matter and neglecting it could lead to undoing strategic tax plans and unnecessary costs.

Moving to a new state? Estate laws are different from state to state, so what works in one state may not be considered valid in another. You’ll also want to update your address, and make sure that family and advisors know where your last will can be found in your new home.

Changes in the law. The last five years have seen an inordinate number of changes to laws that impact retirement accounts and taxes. One big example is the SECURE Act, which eliminated the Stretch IRA, requiring heirs to empty inherited IRA accounts in ten years, instead of over their lifetimes. A strategy that worked great a few years ago no longer works. However, there are other means of protecting your heirs and retirement accounts.

Do you have a Power of Attorney? A POA gives a person you authorize the ability to manage your financial, business, personal and legal affairs, if you become incapacitated. If the POA is old, a bank or investment company may balk at allowing your representative to act on your behalf. If you have one, make sure it’s up to date and the person you named is still the person you want. If you need to make a change, it’s very important that you put it in writing and notify the proper parties.

Health Care Power of Attorney needs to be updated as well. Marriage does not automatically authorize your spouse to speak with doctors, obtain medical records or make medical decisions on your behalf. If you have strong opinions about what procedures you do and do not want, the Health Care POA can document your wishes.

Last Will and Testament is Essential. Your last will needs regular review throughout your lifetime. Has the person you named as an executor four years ago remained in your life, or moved to another state? A last will also names an executor for your property and a guardian for minor children. It also needs to have trust provisions to pay for your children’s upbringing and to protect their inheritance.

Speaking of Trusts. If your estate plan includes trusts, review trustee and successor appointments to be sure they are still appropriate. You should also check on estate and inheritance taxes to ensure that the estate will be able to cover these costs. If you have an irrevocable trust, confirm that the trustee is still ready and able to carry out the duties, including administration, management and tax returns.

Gifting in the Estate Plan. Laws concerning charitable giving also change, so be sure your gifting strategies are still appropriate for your estate. An estate plan review is also a good time to review the organizations you wish to support.

It is a wise and prudent choice to consider maintaining an estate planning checklist to ensure that your planning is up to date with your life. If you would like to learn more about crafting an estate plan, please visit our previous posts. 

Reference: Kiplinger (July 28, 2021) “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?

Episode 7 of The Estate of The Union podcast is out now

 

www.texastrustlaw.com/read-our-books

how to address an estranged child in your planning

How to Address an Estranged Child in your Planning

For most families, estate planning is a relatively straightforward task, protecting loved ones and preparing to distribute assets. But when parent-child relationships have frayed or fractured, estate planning becomes more complicated and emotional, according to the article from The News-Enterprise titled “Estate planning must account for estranged children.”  This poses the question of how to address an estranged child in your planning.

The relationship may be broken for any number of reasons. The child may have married an untrustworthy person, have addiction issues, or have made a series of hurtful decisions. In some families, the parents don’t even know why a break has occurred, only that they are shut out of lives of their children and grandchildren.

The reason for the estrangement impacts how the parents address their estate plan regarding the child. If there is an addiction problem, the parents may want to limit the child’s access to funds, and that can be accomplished with a trust and a trustee. However, if the situation is really bad, the parents may wish to completely disinherit the child. Both require considerable legal experience, especially if the child might contest the will.

There are three basic options for dealing with this situation.

One is to leave an outright gift of some kind, with no restrictions. The estranged child may receive a smaller inheritance, but not so small as to open the door to litigation.

Second, the parent may create a testamentary trust in their last wills. Testamentary trusts become effective at death, with funds going into the trust and controlled by a trustee. The heir will have no control over the assets, which are also protected from creditors, divorces, or scammers.

Third is the option to completely disinherit the child. That way the child will not be entitled to any portion of the estate. The language in the last will must be watertight and follow the laws of the state exactly so there is no room for the disinheritance to be challenged.

There needs to be language that clarifies whether the child’s descendants (grandchildren) are also being disinherited. If the child is disinherited but their children are not, the descendants will inherit the child’s share as if the child had predeceased his or her parents.

Some estate planning attorneys recommend writing a letter to the child to explain the reasoning behind their disinheritance. The letter could be seen as reinforcing the parent’s intent, but it may also open old wounds and have unexpected consequences.

Your estate planning attorney will be able to clarify the steps to be taken to address an estranged child in your planning. This is a situation where it will be helpful to discuss the full details of the relationship so the correct plan can be put into place. If you would like to learn more about managing family dynamics, please visit our previous posts. 

Reference: The News-Enterprise (July 20, 2021) “Estate planning must account for estranged children”

 

Understanding the responsibilities of the trustee

Understanding the Responsibilities of the Trustee

Being a fiduciary requires putting the interest of the beneficiary over your own interests, no matter what. The person in charge of managing a trust, the trustee, has a fiduciary duty to the beneficiary, which is described by the terms of the trust. Understanding the responsibilities of the trustee requires a review of the trust documents, which can be long and complicated. This is explained in a recent article titled “Estate Planning: Executors, executrix and personal representatives” from nwitimes.com.

An estate planning attorney will be able to review documents and explain the directions if the trust is a particularly complex one.

If the trust is a basic revocable living trust used to avoid having assets in the estate go through probate, duties are likely to be similar to those of a personal representative, also known as the executor. This is the person in charge of carrying out the directions in a last will.

A simple explanation of executor responsibilities is gathering the assets, filing tax returns, and paying creditors. The executor files for an EIN number, which functions like a Social Security number for the estate. The executor opens an estate bank account to hold assets that are not transferred directly to named beneficiaries. And the executor files the last tax returns for the decedent for the last year in which he or she was living, and an estate tax return. There’s more to it, but those are the basic tasks.

A person tasked with administering a trust for the benefit of another person must give great attention to detail. The instructions and terms of the trust must be followed to the letter, with no room for interpretation. Thinking you know what someone else wanted, despite what was written in the trust, is asking for trouble.

If there are investment duties involved, which is common when a trust contains significant assets managed in an investment portfolio, it will be best to work with a professional advisor. Investment duties may be subject to the Prudent Investor Act, or they may include the name of a specific advisor who was managing the accounts before the person died.

If there is room for any discretion whatsoever in the trust, be careful to document every decision. If the trust says you can distribute principal based on the needs of the beneficiary, document why you did or did not make the distribution. Don’t just hand over funds because the beneficiary asked for them. Make decisions based on sound reasoning and document your reasons.

Being asked to serve as a trustee reflects trust. Understanding the responsibilities of the trustee is a serious responsibility, and one to be performed with great care.

If you would like to learn more about the role of trustee, please visit our previous posts. 

Reference: nwitimes.com (July 18, 2021) “Estate Planning: Executors, executrix and personal representatives”

 

what a power of attorney should include

What a Power of Attorney Should Include

The pandemic has taught us how swiftly our lives can change, and interest in having a power of attorney (POA) has increased as a result. But you need to know how this powerful document is and what it’s limits are. It is important to understand what a power of attorney should include. A recent article from Forbes titled “4 Power of Attorney Clauses You Need To Focus On” explains it all.

The agent acting under the authority of your POA only controls assets in your name. Assets in a trust are not owned by you, so your agent can’t access them. The trustee (you or a successor trustee, if you are incapacitated) appointed in your trust document would have control of the trust and its assets.

There are several different types of POAs. The Durable Power of Attorney goes into effect the moment it is signed and continues to be valid if you become incapacitated. The Springing Power of Attorney becomes valid only when you become incapacitated.

Most estate planning attorneys will advise you to use the Durable Power of Attorney, as the Springing Power of Attorney requires extra steps (perhaps even a court) to determine your capacity.

All authority under a Power of Attorney ceases to be effective when you die.

There are challenges to the POA. Deciding who will be your agent is not always easy. The agent has complete control over your financial life outside of assets held in trust. If you chose to appoint two different people to share the responsibility and they don’t get along, time-sensitive decisions could become tangled and delayed.

Determine gifting parameters. Will your agent be authorized to make gifts? Depending upon your estate, you may want your agent to be able to make gifts, which is useful if you want to reduce estate taxes or if you’ll need to apply for government benefits in the near future. You can also give directions as to who gets gifts and how much. Most people limit the size of gifts to the annual exclusion amount of $15,000.

Can the POA agent change beneficiary designations? Chances are a lot of your assets will pass to loved ones through a beneficiary designation: life insurance, investment, retirement accounts, etc. Do you want your POA agent to have the ability to change these? Most people do not, and the POA must specifically state this. Your estate planning attorney will be able to custom design your POA to protect your beneficiary designations.

Can the POA amend a trust? Depending upon your circumstances, you may or may not want your POA to have the ability to make changes to trusts. This would allow the POA to change beneficiaries and change the terms of the trust. Most folks have planned their trusts to work with their estate plan, and do not wish a POA agent to have the power to make changes.

The POA and the guardian. A POA may be used to name a guardian, who would be appointed by the court. This person is often the same person as the POA, with the idea that the same person you trust enough to be your POA would also be trusted to be your guardian.

The POA is a more powerful document than people think. You need to know what a power of attorney should include to make it work the way you want. Downloading a POA and hoping for the best can undo a lifetime of financial and estate planning. It’s best to have a POA created that is uniquely drafted for your family and your situation.

If you are interested in learning more about powers of attorney, please visit our previous posts. 

Reference: Forbes (July 19, 2021) “4 Power of Attorney Clauses You Need To Focus On”

Episode 7 of The Estate of The Union podcast is out now

 

www.texastrustlaw.com/read-our-books

creating a trust for a dependent adult

Creating a Trust for a Dependent Adult

If you are the parent or guardian of an adult who depends upon you financially, estate planning is critical. There are things you need to know when creating a trust for a dependent adult. When you can’t care for your child, an estate plan which includes funding and guidance protects your dependent and ensures that they will receive the care they need, reports Parents in the article “Wills and Trusts for Adult Dependents.”

First, you need a will. This fundamental estate planning document lets you be very specific about what you want to happen after your death. It also nominates guardians for minor and adult children and pets. Wills can be used to manage decisions that apply to everyone. If there is no will, the laws of your state and a court make all of the decisions, not you.

If you have dependents, the will lets you choose who you want to serve as a guardian for your children. If you are already the legal guardian of a dependent adult, the will can be used to name the person to take over for you. Choose guardians who are up to the responsibilities that come with caring for a dependent adult.

The will is used to manage assets after your death. However, in the case of a dependent adult, you may also need a Special Needs Trust. If you pass assets directly to a dependent adult and they are receiving certain government benefits, the inheritance may make them ineligible for benefits and services.

A Special Needs Trust allows you to earmark a certain amount of money for their care. An estate planning elder lawyer will be familiar with this type of trust and help you create it.

If your dependent adult does not receive any means-tested benefits but is not able to manage an inheritance, then a trust can be used to hold assets to be controlled by a trustee, who might also be a guardian or caretaker.

A will and trusts are central to a well-prepared estate plan. Working with an estate planning attorney will give you the opportunity to consider how you want to distribute assets while you are living and after you have died. It also gives you the opportunity to name a personal representative, or executor, who will manage your estate after your death and be in charge of making sure that your wishes, as expressed in your will, are followed.

Creating a trust for a dependent adult can be more complex than wills and allow for a greater degree of control over assets. The trust is a legal entity to benefit others, and a trustee is the person named to be in charge of the trust.

Bear in mind that anything passed through a will has to go through a court process known as probate. The will has to be validated and the executor has to be approved by the court. Any assets in the trust are already outside of your estate and do not go through probate.

If you would like to learn more about establishing trusts for dependent adult children, please visit our previous posts. 

Reference: Parents (July 7, 2021) “Wills and Trusts for Adult Dependents.”

Photo by RODNAE Productions from Pexels

 

Episode 7 of The Estate of The Union podcast is out now

 

www.texastrustlaw.com/read-ou-books

blended family dynamics create challenges

Blended Family Dynamics create Challenges

Law school teaches about estate planning and inheritance, but experience teaches about family dynamics, especially when it comes to blended families with aging parents and step siblings. Blended family dynamics can create challenges and put an estate plan at risk, advises the article “Could Your Aging Parents’ Estate Plan Create A Nightmare For Step-Siblings?” from Forbes. The estate plan has to be designed with realistic family relationships in mind.

Trouble often begins when one parent loses the ability to make decisions. That’s when trusts are reviewed for language addressing what should happen, if one of the trustees becomes incapacitated. This also occurs in powers of attorney, health care directives and wills. If the elderly person has been married more than once and there are step siblings, it’s important to have candid discussions. Putting all of the adult children into the mix because the parents want them to have equal involvement could be a recipe for disaster.

Here’s an example: a father develops dementia at age 86 and can no longer care for himself. His younger wife has become abusive and neglectful, so much so that she has to be removed from the home. The father has two children from a prior marriage and the wife has one from a first marriage. The step siblings have only met a few times, and do not know each other. The father’s trust listed all three children as successors, and the same for the healthcare directive. When the wife is removed from the home, the battle begins.

The same thing can occur with a nuclear family but is more likely to occur with blended families. Here are some steps adult children can take to protect the whole family:

While parents are still competent, ask who they would want to take over, if they became disabled and cannot manage their finances. If it’s multiple children and they don’t get along, address the issue and create the necessary documents with an estate planning attorney.

Plan for the possibility that one or both parents may lose the ability to make decisions about money and health in the future.

If possible, review all the legal documents, so you have a complete understanding of what is going to happen in the case of incapacity or death. What are the directions in the trust, and who are the successor trustees? Who will have to take on these tasks, and how will they be accomplished?

Blended family dynamics can create challenges, but there are solutions.  If there are any questions, a family meeting with the estate planning attorney is a great option. Most experienced estate planning attorneys have seen just about every situation you can imagine and many that you can’t. They should be able to give your family guidance, even connecting you with a social worker who has experience in blended families, if the problems seem unresolvable.

If you would like to learn more about estate planning for blended families, please visit our previous posts.

Reference: Forbes (June 28, 2021) “Could Your Aging Parents’ Estate Plan Create A Nightmare For Step-Siblings?”

Episode 6 of The Estate of The Union podcast is out now

 

www,texastrustlaw.com/read-ou-books

Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact The Wiewel Law Firm to schedule a complimentary consultation.
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