Special Needs Estate Planning for Persons with Disabilities, Part Three: Legal and Financial Planning

Special Needs Estate Planning for Persons with Disabilities, Part Three: Legal and Financial Planning

Special Needs Estate Planning for Persons with Disabilities, Part Three: Legal and Financial Planning

Edward V. Wilcenski, Esq., is a founding partner of Wilcenski & Pleat, PLLC, a law firm concentrating its practice on Special Needs Estate Planning and Elder Law, with offices in Clifton Park, New York and Glens Falls, New York. He has presented on estate and future care planning for individuals with disabilities and their families at Transitions. The following series contains material from his presentations. More information can be found at www.wplawny.com.

Legal Planning

The legal planning component of a Special Needs Estate Plan addresses many traditional estate and long-term care planning issues. Has the client considered how the estate will be divided among his or her intended heirs? What is the family's current estate and income tax exposure? Is there a will in place, and if so, has it been updated since the onset of the son's or daughter's disability? Will the appointment of a guardian be necessary, and if so, who will be the guardian?

What if the caregiver needs assistance? Does he or she have a properly drafted power of attorney and healthcare proxy? If aging parents are serving as the primary caregivers for the person with the disability, have they considered how they will pay for their own long-term care needs without jeopardizing the inheritance of their children? Does the parent’s will or living trust include a properly drafted supplemental needs trust, which is a trust instrument designed especially for individuals with disabilities? Who will serve as trustee of the supplemental needs trust? Does the trustee understand how these types of trusts are to be administered?

Financial Planning

A sound financial plan complements the legal component of a Special Needs Estate Plan. Whereas legal planning primarily involves the preservation and transmission of wealth, financial planning is primarily concerned with the enhancement of wealth and the selection of assets to ensure growth, diversification, liquidity and availability to meet a client's goals and objectives. The two areas are closely intertwined, and a comprehensive Special Needs Estate Plan will contain components of both disciplines.

Consider, for example, a family whose primary asset is the family home. Many families hope that the value of the home will be available as an inheritance for a child with a disability and heirs. But, have the parents considered what will happen if they themselves reach an age when they will no longer be able to live in the home and need assistance with their own health care needs? If the caregivers have not considered how their own long-term care costs will be met, there is a risk that the home would need to be sold to satisfy these obligations and may never be available for the child with the disability.

One solution may be to use other assets to generate the income that would be necessary to pay these costs. Another possibility may be the purchase of a long-term care insurance policy. In the end, the most appropriate planning route may be to restructure assets so that long-term care costs would be paid for through the Medicaid system. Legal and financial professionals participating in the development of a Special Needs Estate Plan should expect to share their ideas on the pros and cons of each strategy and arrive at the most appropriate solution for the family.

Return to this blog next week for more information about life care planning.