William J. Kovatch, Jr., Attorney at Law, PLLC

Located in Alexandria, Virginia, we specialize in the legal needs of the elderly community. From estate planning to guardianships to Medicaid planning to special needs trusts, we strive to provide the best quality legal advice suited to your needs, values and goals.

Wednesday, March 17, 2010

Do I Need a Special Needs Trust for My Child’s Litigation Award?

Parents of a disabled child may spend long hours fighting insurance companies in a lawsuit. Finally, they may come to a point where an acceptable settlement is offered, or a verdict rendered. This is it, right? This is the end of it?

Perhaps not. Many times, trial attorneys and well-meaning parents caught up in the heat of a lawsuit focus on winning the case, and do not consider how the child will receive health insurance as the child gets older.

A child cannot stay on a parent’s health insurance forever. At some point, a child who has become and adult is no longer eligible for coverage in most employer-provided health insurance policies. If the child is unable to work, then that child will most likely need to rely on public benefits, such as Supplemental Security Income or Medicaid.

These public benefits programs, however, are means tested. That means, a person must only have a minimum amount of income and assets available to them in order to qualify. A large litigation award, if not structured properly, can prevent a child from qualifying for Medicaid.

The answer to this dilemma could be a special needs trust. A special needs trust is a legal arrangement where one person, a trustee, holds and manages some assets for the benefit of another, called the beneficiary. The beneficiary of the special needs trust does not own the assets, and can never direct how the assets are to be used. However, the trust agreement provides that the assets are to be used for the benefit of the disabled child, at the discretion of the trustee. By arranging the assets in this way, they are not “available resources,” and will not disqualify the beneficiary for the public benefits program. But, they do remain available to be used to supplement the beneficiary’s benefits.

Talk to your lawyer to see if a special needs trust is the right solution for you and our disabled child.

Monday, March 8, 2010

Preparing for Probate

It is traumatic enough when a loved one dies. Eventually, however, someone faces the task of wrapping up the affairs of the dearly departed. It can be daunting. There are bills to be paid, property to find, and, if anything is left, heirs to be paid.

How should someone begin? First, forget everything you've ever seen on TV. There is never a time when all of the heirs and people mentioned in the will are brought into a room for a formal reading of the will. Quite frankly, administering an estate will take time. It could be months before anyone really knows where the money is going.

First, you need to see if there is a will. Often, close relatives will know if there is a will and where it is kept. If you know who the decedent's attorney was, the attorney may know. Some people will file their will with the probate court while they are still alive. In some jurisdictions, if you are in possession of someone's will, you are legally obligated to come forward and file it. Failure to do so in the right period of time could result in fines.

You certainly should not wait for the will to be found to make funeral or memorial arrangements. With the time it takes to probate an estate, the will is not the place to put funeral or memorial instructions.

Next, you need to start identifying the decedent's assets. Did he own a house? Does he have a bank account? What other possessions did the decedent have? It may be necessary to safeguard the decedent's property until the administration is complete. If the decedent owns real estate, and no one else will live there, the utility companies should be notified.

Next, it is time to consider whether the decedent left a spouse and/or children. Immediate family will likely be entitled to an allowance from the estate until the administration is complete. This is also the time to consider whether the decedent had any pay on death accounts, such as life insurance or pension benefits. It is also the time to consider whether to file for any survivor's Social Security benefits. The final income tax return may need to be filed.

Whoever is responsible for winding up the decedent's affairs should also try to collect some initial information about the decedent's debts. Once initial information about a decedent's assets and debts have been collected, it may be time to file to open a probate estate. Many jurisdictions charge a probate fee based on the value of the property which will pass through probate. This is why you need at least a good estimate of the decedent's assets and liabilities before filing for probate. Notices will need to be given to the decedent's heirs at law, heirs mentioned in the will, and known creditors. A notice may need to be published in a newspaper.

In some states, if the assets are so few, it may not be necessary to probate the estate. Also, if the decedent's assets were mostly held in pay on death accounts, there may not be enough assets passing through a will or the law of intestacy to open an estate with the probate court.

Once an estate has been opened, the person in charge of winding up the affairs (depending on the circumstances this is the executor or the personal representative) will need to obtain a tax identification number for the estate, and open a bank account for the estate. The decedent's other accounts may need to be transferred to the new account.

The administrator will also have to be familiar with the probate court requirements. Usually, an inventory of the decedent's assets will need to be filed with the court and provided to the heirs and creditors. Later, the administrator will likely need to file accountings to show how the decedent's assets have been managed. The administrator should be sure to keep receipts.

There will usually be some kind of proceeding to determine the claims of any creditors. Once all creditors have been identified, their claims should be examined to determine their validity. Each jurisdiction will likely have in its law a listing of which claims have priority. The claims must be paid in that order. If anything is left over, the administrator may then be required to file an estate tax return and pay any estate or inheritance tax due. Then, the heirs can be paid.

Once all of these steps have been taken, then the administrator can file to close the estate. This an important step. In many states, opening the estate places the tax authorities on notice. The tax authorities will be looking for the estate to be closed to make sure any taxes that are due will be paid.

Probate need not be feared. While it involves a lot of steps, with proper advice and organization, it can go smoothly.