Worcester & Middlesex County Estate Planning & Elder Law

Planning Critical for Families with Children with Special Needs

A college education is expensive, but for families with children with special needs, the costs could easily double.

The American College of Financial Services in Bryn Mawr, PA, found that the average cost of rearing a child from birth to age 18 is about $250,000. However, rearing a child with special needs can easily be more than double that amount. If you have a child with special needs, then you should have a plan in place to help you address the unique financial and other challenges that go with providing care for your child.

WTNH’s recent article, "Financial planning for families with children with special needs," advises that working with a team of different professionals can help parents manage both the financial and nonfinancial aspects of providing care.

Here are some of the key roles:

• Caregiver: Working with a caregiver can help manage the challenges of providing care and addressing everyday responsibilities. The cost will be commensurate with the level of care required, so determining the need will be important to creating a budget.
  
  
• Estate planning attorney: A lawyer who specializes in estate planning can help create a special needs trust to shield assets for a beneficiary with special needs, while preserving her ability to qualify for government programs. An updated will and living will with the names of a guardian and trustee will also be crucial to be sure that care is provided for in accordance with your wishes. A letter of intent can also be a helpful document for caregivers. It’s not a legally binding document, but it can provide important information like medical history, family history, information about your child’s preferences, and your wishes for the type of care they should receive.
  
  
• Accountant: As a provider of care to a child or dependent with special needs, you may qualify for tax deductions for medical expenses, tax credits, and tax-advantaged accounts. For individuals disabled before the age of 26, a 529A account can provide tax-free growth and use of the money to improve health and quality of life.
  
  
• Financial advisor: A financial advisor, who specializes in working with families who have children or dependents with special needs, can provide specific recommendations on how to fund and protect accounts for disabled dependents.

In addition, look at any available government benefits, like Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI). Don’t overlook employee benefits, like insurance to replace income, in the event of a parent’s premature death or disability, flextime, or child care reimbursements.

Reference: WTNH (August 7, 2018) "Financial planning for families with children with special needs"

Planning for a child with special needs is imperative. If you need help, give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.

What To Do When Your Child with Special Needs Turns 18

If you have a child with special needs, once they turn 17, you need to start thinking about what's going to happen when they turn 18 and you are no longer legally in control of their life.

A recent article in the Effingham (IL) Daily News, "Teaching parents about guardianship of disabled children," explains that in this transition period, parents need to decide whether their child needs a guardian, or if they need a power of attorney.

Once a child is age 18, the parent is no longer the child's legal guardian.

You should identify the support required for your child and ask what other support they need while they’re transitioning. Work with a special needs attorney and ask about guardianship. Guardianship is a way to protect an individual who can’t take care of herself, make informed decisions, or handle financial assets. An experienced attorney will explain guardianship and alternatives that may be chosen, if the child is capable of making some, but not all, decisions on her own. There are different kinds of guardianships and different kinds of powers of attorney (POA) for estate and healthcare requirements.

A person can be disabled in some ways, but still be competent to execute the powers of attorney. If the person understands who their family is, who she is, if she’s oriented to time, and she knows who they trust to handle their business or healthcare decisions, then she can probably sign powers of attorney.

A POA is written authorization to represent a person and make specific decisions on her behalf. The child may have a POA over her healthcare or estate management. A guardianship of the child’s healthcare or estate management is appointed by a judge after reviewing physician statements about the person with a disability's needs.

Remember that having power of attorney over their child's financial matters doesn't give parents power over everything. Things not covered in the POA document are things over which the agent doesn't have the authority. A POA can be revoked when the person assigning it is competent. However, in a guardianship appointed by the court, you have a duty to act, until the court determines otherwise.

A guardianship requires a physician's report, which states that the alleged disabled person needs a guardian. The physician should state specific reasons for the court. Guardianship should be as narrowly designed as possible.

Reference: Effingham (IL) Daily News (April 15, 2018) "Teaching parents about guardianship of disabled children"

Need help with your own unique situation? Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.

Consider an Integrity Monitor for Your Special Needs Trust

If you’re planning a trust or are a beneficiary of a trust, you should insist upon imposing an “Integrity Monitor” or independent fiduciary to oversee the investment program, as well as the service providers retained to implement that program.

An Integrity Monitor can be a carefully defined role for an individual who has the unique skills required to fulfill certain duties and add significant protection to a special needs trust.

Forbes reported on this in its article titled "Trusts, Special Needs Trusts, Family Offices All Need Integrity Monitors But Don't Know It."

An Integrity Monitor should have the investment management industry and forensic expertise needed to prevent any wrongdoing with the administration of the trust.

If you don’t have an expert in money management malfeasance dedicated to overseeing the investment program of your trust, you may be taken advantage of daily throughout the lifetime of the trust.

It’s common practice for major companies, agencies, and governments to hire “inspector generals” to oversee their operations and prevent the occurrence or reoccurrence of illegal or unethical business practices, as well as to detect fraud.

Courts and regulators also often require that such a monitor be placed within a company to prevent future abuses as part of a legal settlement, when the company has engaged in past wrongdoing.

You shouldn’t wait until something goes wrong with the administration of a special needs trust to add this important layer of independent protection.

The annual cost is fairly insignificant and an integrity monitor who’s doing his or her job will more than pay for that expense.

Reference: Forbes (January 30, 2018) "Trusts, Special Needs Trusts, Family Offices All Need Integrity Monitors But Don't Know It"

Need help with your own unique situation? Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.

Financial and Estate Planning When Family Members Have Special Needs

Since most federal and state benefits are "needs based," the government is always looking over the shoulder of persons with special needs.

About 58 million people nationwide over the age of 5 identify themselves as disabled. That’s the largest single minority in the country. Millions of Americans want to help them.

However, as CBS News says in its recent article, "Special needs’ people need special financial planning," giving money directly to a child or adult who has special needs—especially if they're already receiving government benefits—can create problems.

If a person with special needs has more than $2,000 in their own name, he or she risks the loss of the government benefits that he or she already receives. It’s a major headache to get them back. Instead of giving a lump sum of cash to a person with special needs, the money should be structured in a way that doesn't violate government benefit requirements.

This is important because children with disabilities, like Down syndrome, now have a much longer life expectancy. As a result, the dependent person will probably outlive the parents. However, they will still require care throughout their life. Many adults with special needs live independently or in homes with little assistance. However, this doesn't mean that their government program benefits can cover their everyday needs. Therefore, it’s crucial to plan ahead.

There are several ways to have your money benefit people with special needs throughout their lives, without the loss of their federal benefits. One way is to create a special needs trust. This is a trust with the explicit purpose to "supplement, not supplant" federal and state assistance programs and to create a better quality of life for this person. A special needs trust can provide for special medical equipment, eyeglasses, and vacations, for example.

Work with an experienced estate planning attorney to create a special needs trust, because there are  many rules and regulations involved. For example, the beneficiary (the individual with special needs) can't own the trust—there must be a designated trustee or "third-party provider" who dispenses the money.

Another important part of an estate plan for the future of a dependent with special needs, is a "letter of intent." These are instructions that state what the guardian wants to happen in the future. It sets out everything a person with special needs requires, their history, and what you and the person want in the future.

Another alternative is an ABLE (Achieving Better Life Experience) account. This allows contributions to a maximum of $15,000 annually, provided the person is diagnosed as disabled prior to age 26. There is a maximum of $100,000 that can be in this account, before the person with disabilities loses his or her government benefits. An ABLE account can be used for expenses like education, employment training, health, legal fees, and funeral expenses.

Avoid these common mistakes that parents and caregivers make when planning:

• Disinheriting the child with special needs. Government benefits help provide food, shelter, and medical care, but remember, it’s no more than bare-bones necessities.
• Placing assets in your child's name. To qualify for government benefits like SSI or Medicaid, a person can’t have more than $2,000 in assets. If you leave funds or convertible assets directly to your child with special needs, they’ll need to be "spent down" to qualify for benefits.
• Relying on your other children to take care of their sibling with special needs. This is a lot to ask of a brother or a sister, and it can cause resentment.
• Leaving money to your other children to support their sibling with special needs. This isn’t a good idea, because the funds could be lost if the caregiving sibling dies, gets divorced, is sued, goes bankrupt, or just spends the funds. There's also no accountability.
• A 529 College Savings Plan or savings bond in your dependent's name. Like other assets, if these are more than $2,000, your child with special needs could be ineligible for government benefits.

Reference: CBS News (December 25, 2017) "Special needs’ people need special financial planning"

Need help making sure your family member with special needs is taken care of? Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.

What Is Fair for a Family with a Child with Special Needs

Exceptional care must be taken when considering how and when your inheritance is distributed to most children with special needs, because of the public benefits they may be receiving and the tax consequences involved.

As parents, it’s hard to treat all children fairly, despite their different personalities and capabilities. Most try to ensure that one child never feels less loved than another. Some will carry that over into their estate planning. However, there are times when inequity may be a better choice.

A recent Tickertape article is appropriately titled "Estate Planning for Special Needs Children: Trying to Be Even-Steven?" The article says that one instance when fair is not always equal is when you’re planning the future for a child with special needs after you die.

Children with special needs are typically eligible for state and federal benefits to provide them with assistance for their long-term support. Among the most common are Supplemental Security Income (SSI) and Medicaid. In many states, SSI may qualify children for Medicaid, or Medicaid comes automatically with SSI. These are need-based benefits that are means-tested. SSI recipients have a strict assets threshold of $2,000 for an individual. If a child with special needs gets an inheritance, it might push him or her above that ceiling. This could result in ineligibility for the program benefits that might be used to cover medical, therapeutic, or housing needs.

When money is paid directly to the child as beneficiary, it can cut SSI benefits. The same is true if the heir with special needs disclaims the inheritance.

Government benefits may be retained if an inheritance is set up in a Special Needs Trust (SNT), which is designed to help a beneficiary with special needs and preserve government aid while protecting assets. The trust allocates inheritance assets to the child with special needs, but it’s via a third party.

However, there might be tax implications. While the inheritance itself isn’t taxed, the income that it generates in a special trust is typically taxable at trust tax levels. Creating an SNT can be complicated, and the rules can vary from state to state. Speak to a qualified trust attorney to be sure that all income is reported properly and there are no deductions left on the table.

Reference: Tickertape (June 14, 2017) "Estate Planning for Special Needs Children: Trying to Be Even-Steven?"

Treating children equally when one has special needs may result in creating an inequality. Because of the government program eligibility requirements, you must consider the net tax implications when dividing your estate. Be straightforward with your children as to your intentions, especially if one child will be needing long-term care. Knowing the plans will help everyone prepare for the future. We can help you plan. Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com. 

Retirement in Families with Special Needs

The financial planning challenges for parents of special needs children are myriad and complex—and retirement planning presents one of the toughest challenges.

The big challenge for many families with special needs is balancing the financial needs of retirement with the long-term needs of a child with a disability. Those latter needs typically will outlive the parents.

Morningstar’s recent article, "Retirement Planning for Special-Needs Families," explains that the need is growing. One in every five Americans has a disability, and 20 million families have at least one family member who has a disability, says the National Disability Institute. The costs can be extremely high, with the lifetime cost of caring for a person with autism ranging from $1.4 million to $2.4 million, according to an advocacy and research group. Lifetime costs are similar for people affected by other severe impairments.

While government benefit programs provide some assistance, the eligibility rules vary depending on when a disability is incurred. There’s a set of rules for people disabled as children (prior to age 22) and another for those disabled at older ages.

Here some key topics for consideration and action:

• The care plan should include the safety of the child, along with aspects of life fulfillment, including work, learning, and play.
• Projected cash flow needs will depend on the type of disability, the capability of the individual needing care, and the level of care needed.
• Investment allocations. Families who have a child with special needs should be more conservative in how they allocate their retirement portfolios, and maintain a higher level of cash.
• Government benefits include Social Security, Medicare, and Medicaid (MassHealth in Massachusetts).
• Families need to understand all of the government rules on asset and income limits for a person with disabilities.
• A special needs trust is a critical part of a family retirement plan.
• Beneficiary designations must be structured properly, because inheritances can jeopardize government benefits eligibility.

Reference: Morningstar (January 17, 2017) "Retirement Planning for Special-Needs Families"

Quality planning is complicated. Families who have children with special-needs should consult with an experienced special needs trust attorney. Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com. 

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Federal Legislation Passed to Protect Special Needs Trusts

"This is a fundamental issue of equal protection under the law for those who are facing life-changing disease or disability,” said U.S. Rep. Glenn Thompson, R-Pa., who sponsored the bill.

The U.S. House recently passed the Special Needs Trust Fairness and Medicaid Improvement Act (H.R. 670) by a vote of 382-22. This legislation corrects a presumption in the former law that all persons with disabilities lack the mental capacity to handle their own affairs.

PR Web’s story, "NAELA Praises House Passage of Special Needs Trust Fairness and Medicaid Improvement Act," says the National Academy of Elder Law Attorneys (NAELA) applauds U.S. Rep. Glenn "GT" Thompson (R-PA) and Frank Pallone (D-NJ) for their bipartisan dedication in steering what has been called “common-sense fix” through the House.

"D-4-A" Special Needs Trusts were first recognized by Congress in 1993. This type of trust was designed to help ensure that individuals with disabilities can use the savings they have to provide for their own supplemental needs, while still qualifying for long-term services and support that are only eligible to those who pass means-testing. This includes programs such as Medicaid

A special needs trust can avoid financial destitution for families caring for a loved one with special needs and expensive specialized care.

An oversight in drafting the law regarding these types of trusts resulted in the reality that individuals with no parent, grandparent, or legal guardian were required to petition the court for guardianship.

"Today was a major step forward in correcting this long-overdue fix ,and we look forward to working with the Senate to see the bill signed into law," said NAELA Pres. Catherine Seal, CELA, CAP.

A similar piece of legislation passed in the Senate last year. However, because of some changes, the bill approved by the House will be required to journey back to the Senate for its approval.

Reference: PR Web (Sept. 20, 2016) "NAELA Praises House Passage of Special Needs Trust Fairness and Medicaid Improvement Act"

Do you need help with a special needs trust? Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.  

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N.Y. Judge Denies Guardianship for Woman with Down Syndrome

If there are less restrictive alternatives that are sufficient and reliable to meet the needs of the person, guardianship is not warranted.

A New York Surrogate’s Court judge has denied a request to appoint a guardian for a 34-year-old woman with Down syndrome, citing potential human rights threats from overly restrictive court interventions in the lives of people with disabilities.

New York Law Journal reported in "Noting Human Rights Concerns, Judge Denies Guardianship to Parents of Disabled Adult" that the woman, identified as "Michelle M.," proved she could safely and productively live on her own with weekly supervision from a disability services worker and the help of her friends and family.

Brooklyn Surrogate Margarita Lopez Torres denied a petition filed by Michelle's parents, who asked the court to appoint a plenary guardian under Article 17-A of the Surrogate's Court Procedure Act. Doing so would completely remove their daughter’s legal right to make decisions about her own affairs and would give the guardian total control over her as a disabled person.

The judge said courts must exercise the “utmost discretion” when weighing a guardianship petition. Courts should instead look to impose the least-restrictive terms of oversight. Lopez Torres said the presence of a disability such as Down syndrome doesn’t necessarily form a basis for an individual's guardianship appointment under the Act. To the contrary, depriving disabled people of liberties under an unjustified guardianship is against international human rights conventions, the Americans with Disabilities Act, and the U.S. Supreme Court decision in Olmstead v. L.C.

The judge commented that she's hesitant to apply 17-A partially due to the fact that the statute doesn’t allow courts to limit the scope of the authority afforded to guardians—the guardianship can’t be tailored to the affected individuals.

Lopez Torres described Michelle in her opinion as "vibrant and engaging" and someone who has lived independently since 2008 with two roommates in a publicly supported apartment. She’s able to conduct her day-to-day life well, including banking, shopping, and—until her employer recently moved away—keeping a part-time job in a cellphone supply store, the judge said.

Reference: New York Law Journal (July 27, 2016) "Noting Human Rights Concerns, Judge Denies Guardianship to Parents of Disabled Adult"

Guardianship can be a tricky issue, especially when dealing with adults with special needs. For help, give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.  

Retirement Planning When You Have a Child with Special Needs

As the life expectancy of adults with disabilities increases, it’s increasingly complicating one issue for their aging parents: retirement planning.

Having a child with special needs adds complexity to retirement planning. Parents must pay attention to minute but critical details—like beneficiary designations for their workplace 401(k)—while trying to save as much as possible for their own retirement, and at the same time trying to ensure that their child will have care after they’re gone.

A recent MarketWatch article, "Parents of special needs children plan for two futures," says that you’re planning for two lifetimes. In 2030, there will be approximately 1.2 million adults age 60 and older in the U.S. with developmental disabilities. That’s about twice as many of the 642,000 who fit that profile in 2000, according to 2012 research by the University of Illinois at Chicago. Also, according to the National Down Syndrome Society, today people with Down syndrome have a life expectancy of 60, compared with just 25 in 1983.

It’s critical that parents make certain that any savings and investments won’t disqualify their child from means-tested government benefits, which can impact the parents’ ability to save for retirement. To avoid this, parents should ask an elder law or estate planning attorney to help them create a special needs trust. The assets held in the trust for the person with disabilities won’t affect his or her eligibility for government benefits.

But remember: Rather than naming a child with special needs as the direct beneficiary of any asset, parents with a special needs trust for their child should name the trust the beneficiary. Parents can use their 401(k) or IRA funds as needed during retirement and any remaining funds will flow to their beneficiary only on their death.

There’s also a 529 ABLE account, which can hold up to $100,000 in assets without jeopardizing the eligibility of an adult with special needs for means-tested government benefits. Families are able to contribute up to the maximum gift exclusion each year.

At some point, parents themselves will need care—in addition to their child. Diminished capacity in aging parents can mean a need for outside help, which can be very costly. Parents should consider getting long-term care insurance coverage at age 50. That’s when they’re still healthy enough to pass medical underwriting but may no longer have large expenses like a home mortgage or college tuitions for other children.

Although expensive, long-term care policyholders can realize certain tax breaks. The IRS stipulates that qualified long-term care insurance premiums are an expense that can be funded through health savings accounts up to certain limits. Plus, long-term care expenses themselves can be paid out of an HSA, provided they meet certain criteria. HSAs offer other tax advantages. The money isn’t taxed when deposited but appreciates on a tax-deferred basis, and it can be withdrawn tax-free to pay for qualifying medical expenses now or in retirement.

Reference: MarketWatch (July 7, 2016) "Parents of special needs children plan for two futures"

The best way to ensure your financial decisions will not negatively impact your child’s eligibility for means-tested benefits is to work with an experienced elder law attorney. Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.   

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A 529 Savings Plan for the Disabled?

“I’ve heard there’s a new kind of 529 plan that can be used for people with disabilities — specifically for their long-term care. Is that true?”

This isn’t exactly a 529 plan. However, it’s sort of like one. It’s a new kind of account that’s similar in some ways and is designed especially for those individuals with disabilities.

An NJ101.5 article, "Special accounts for the disabled," explains that President Obama signed the Achieving a Better Life Experience (ABLE) Act in 2014 as part of the Tax Increase Prevention Act of 2014. The law allows qualified individuals with disabilities to have tax-free savings accounts in which they can save up to $100,000 without jeopardizing eligibility for Supplemental Security Income (SSI) and other means-tested government programs like Medicaid. SSI benefits are suspended for individuals whose accounts are over $100,000, but their Medicaid benefits will continue.

The plan is modeled on 529 college savings plans, and interest earned on savings is free from income tax; however, contributions to the account will not be tax-deductible.

ABLE accounts are different from 529 plans in that the funds in these accounts can pay for education, healthcare, transportation, housing, and some other similar expenses. To qualify, an individual has to have a disability that happened prior to age 26. Also, each individual with disabilities may have only one ABLE account, and the annual contributions are capped at the federal annual gift tax exclusion. That’s $14,000 this year.

Any funds that remain in the account when the account beneficiary dies must first be used to repay Medicaid for expenses incurred on behalf of the beneficiary.

States can offer these types of plans to people with disabilities, but they first must adopt regulations before financial institutions can offer the plans. Right now, Ohio is the only state in the country that currently offers such a plan, but other states’ residents can open an Ohio STABLE account.

The ABLE Act gives those caring for special needs loved ones another tool. However, the establishment of first- and third-party special needs trusts should be considered when contributions exceed the amounts allowed under the Act or when third parties don’t want their assets to be subject to a Medicaid payback.

Reference: NJ101.5 (July 1, 2016) "Special accounts for the disabled"

A qualified elder law attorney can help guide you through your options. Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.  

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