Customize the estate plan to accommodate disabled beneficiaries | Characteristics
Estate planning should always be tailored to each person creating a plan. This is particularly important when planning for beneficiaries with disabilities. There are three common planning mistakes that estate planning lawyers see frequently.
The most common mistake is simply not planning for beneficiaries with disabilities. This usually happens for one of two reasons. Either the testator, the person signing the deed, intended to plan but postponed the planning until too late, or he was unaware of the need for more specialized planning.
Failure to plan or to understand the importance of planning is certainly not exclusive to those with disabled beneficiaries, but the results of failure may be greater than in other cases.
The most common result of a failure to plan specifically for disabled beneficiaries is that the beneficiary receives an outright distribution of inherited assets. If a simple will is used, or if there is no will, the beneficiary will receive the inheritance, regardless of the public benefits he receives. This inheritance will most likely disqualify them from any benefits based on financial eligibility. It can lead to a disruption of benefits and medical care and can result in the loss of inherited assets.
Similarly, if the disabled beneficiary is not currently receiving public benefits, many people mistakenly assume that they will never need them. After the death of the parent, however, public benefits may no longer be optional. Recipients with disabilities often receive benefits that are not based on financial eligibility, but later in life find that stronger benefits are needed.
The second major planning error is naming a caregiver as the beneficiary rather than the disabled person. Other than a total planning failure, this is probably the most common problem encountered by estate planners.
This strategy is fraught with problems. Perhaps most concerning is that the caregiver distribution immediately becomes part of the caregiver’s estate, not the intended beneficiary. The carer has the right to do what they want with the property and if they decide they no longer wish to care for the beneficiary, they have no obligation to do so.
This also means that if the caregiver has debts such as medical bills, or when the caregiver dies, that property is subject to their own estate. In the event of a lawsuit, this property can be recovered. Upon death, it will be transmitted to the heirs or heirs of the caregiver.
Additionally, if the caregiver themselves are not in an inheritance tax exempt class, they will be liable for tax which may be unnecessary for the intended beneficiary. This often happens when property is left to a close friend, niece or nephew, or even son-in-law or daughter-in-law to care for the testator’s child.
The third major planning mistake is to use a will rather than a trust as the main planning tool. In most cases, the use of a trust is a matter of personal preference and based on a desire for confidentiality and expediency. However, for those with disabled beneficiaries, a trust is an important tool for maintaining beneficiary care without the lengthy probate delay.
The trust can provide confidentiality in addition to continuity of care, without compromising the beneficiary’s benefits. Especially for beneficiaries who don’t want information about their disability to become public information, a trust is a good option.
Planning for disabled beneficiaries should always be intentional and unique to the testator and the beneficiaries. Even similar families can have very different plans. The creation of a specialized scheme can ensure the protection of disabled beneficiaries.
Cynthia Griffin is an elder law and estate planning attorney with Burnett and Griffin PLLC in Elizabethtown. She can be reached at [email protected]