Special Needs Trusts and Your Will

A colleague asked me when a special needs trust is written into a will, does a new document creating the trust need to be drafted. I answered that if the trust was created properly, then no.

However, this raised a separate question for me. Why was the special needs trust created by will, as opposed to a living trust?

To back up, a special needs trust is an instrument to make funds available to benefit a person with disabilities, so that the person would not be disqualified for public assistance. It must be drafted and administered properly, or else the funds in the trust can be considered resources, and thus disqualify the person for government programs such as Medicaid.

The problem with writing a special needs trust in the will is that the will has to be probated. Once the will is probated, here in Virginia, the Commissioner of Accounts for that county will be responsible to oversee the administration of the trust. This will necessarily involve the filing of inventories and accountings, filing fees, and the expense of hiring professionals, such as a lawyer and accountant, to make sure the filings are done properly. All of this can add to the hassle and expense of administering the trust.

A better way to handle the desire to make a special needs trust as part of an estate plan is to create the trust as part of a living trust. That way, upon death, the trust does not have to go through probate, and you do not have the watchful eye of the Commissioner of Accounts over you.

If you want to benefit a person with disabilities through your estate plan, it is best to consult a lawyer experienced and educated in special needs trusts to assist you and create the most efficient plan for you.

Who Will Make Your Funeral Arrangements?

While many people do not want to think about their own funeral arrangements, there are some who have some pretty strong feelings about the subject. The question is, how do you enforce your wishes, since you will not be around to direct your family?

Under Virginia law, the next of kin are entitled to make the decision regarding the disposition of a loved one's body and the funeral arrangements. But, the definition of next of kin is broad, including a spouse and any adult children. If there is disagreement, then the disagreeing next of kin can petition the circuit court.

This seems like an awful lot of trouble. It is especially problematic where a person has entered into a second marriage, or where a person is separated from his or her spouse and has not yet gotten a divorce.

Virginia law does have a solution. A person can designate an individual to be the person to make the decisions regarding the funeral arrangements and the disposition of the body. The designation must be in writing and notarized. It must also be accepted in writing.

If you feel strongly about the disposition of your body and your funeral arrangements, this should be part of your estate plan. You should put your desires in writing, and designate a person whom you trust to go through with your plan. A lawyer can help you accomplish this.

Administrative Agency Cases Require Special Attention

Many people involved in a case before an administrative agency do themselves a disservice by not hiring a lawyer. They assume that because the procedures are informal, they can just as easily present their case as a lawyer. Even before an administrative agency, however, lawyers are vital.

The most important thing to do before an administrative agency is to make a record. That is the case is decided on the testimony, documents and other information submitted to the agency. This is the record. Often, administrative agency cases involve highly technical subject matter. A person before the agency maybe an expert. But, he or she should not assume everyone else is. Thus, it is vital to submit documentation to back up your case. An experienced lawyer knows how to make a record. Indeed, an experienced lawyer will understand that the case could go to court, where the judge will not be a technical expert. Putting enough evidence on the record to convince a judge is key.

Next, people are often anxious to state their case. But, they may not realize that there words can be misinterpreted. A lawyer can help select the right message and be careful in word selection.

Finally, a good lawyer will research the law and learn how to set up the legal arguments.

So, if you find yourself in a case before an administrative agency, you should invest the resources to find an experienced lawyer to help you.

Non-Probate Assets Are an Important Part of Your Plan

This article reminds us of how important it is to make sure you are naming your beneficiaries properly. Pay on death accounts or accounts with a death beneficiary are an important part of your estate plan. They are meant to pass property, such as life insurance proceeds, or retirement accounts, without the need to go through the probate court. But, since they are not governed by the court, you need to make sure that you are naming your beneficiaries properly.

For example, when I have a couple with young children, I normally recommend a living trust as the corner stone of the estate plan, so money can be managed for the children should the parents meet an early demise. But, for most young couples, their "wealth" will be held in pay on death accounts like life insurance. For the plan to work, the couples have to change their beneficiaries to the trust.

Likewise, it is important on major life events to change the beneficiaries of the accounts. Such events include a marriage, a divorce, a death in the family, or some similar event. It is a good idea to review the beneficiaries regularly to make sure your estate plan is working the way you intend it to work.

Young Families Need a Good Plan

Estate planning is not just for more established people, who want to direct who gets their money. Families with young children have special reasons to plan. Parents need to plan to make sure that their children are protected and cared for.

Your estate plan is not just about money. You can name whom you want to act as the guardian of your minor children should you meet an early demise. This avoids leaving the decision entirely to a judge who knows nothing about you. Your estate plan can include instructions to your child's guardian on how you would want your children raised, and what values are important to you.

For a young family, a good estate plan should also include a method to manage money until the child reaches an age when he or she can be more responsible. This is often done through a trust, which can act as the beneficiary for insurance policies and retirement accounts. You can appoint a trusted person to manage the money, and instruct that person to cooperate with your child's guardian.

Young families should contact an attorney early, and make sure that their children are protected.

Even Those With Less Than $1 Million Need to Plan

This article explains what estate planning is, and why even those without $1 million need to plan. For Virginia residents, anyone with more than $50,000 in assets needs to plan. I have seen estates worth around $100,000 incur over $10,000 in estate administration costs. Spending $2,000 or less to consult with a lawyer can save both the expense and the hassle.

Article on Why Women Need to Do Estate Planning

More and more of the clients coming to me to consult about estate planning are women, which I think is a good sign. Whether it's to plan after a divorce, to protect from the credit problems of a spouse, or just to make sure that minor children are protected in the event of something tragic, it is extremely important that women explore their options and take action. This article in Forbes is a good explanation of the importance of estate planning.