Special Needs Families and Special Needs Trust

If nothing prepares a person for parenting, consider how much harder it is to be prepared to raise a child with special needs. Parents often sink in uncharted waters. It’s not just a matter of negotiating all of the day-to-day details, says Newsday in the article “Be ‘biggest advocate’: Parents plan future for adult children with special needs.” Special needs families need to plan for what will happen as the parents age, become ill or pass away.

As an adult child with disabilities ages, eventually there will be medical issues. If the parents are gone, who will be able to make medical decisions? Where they live, who will oversee their finances and who will be there for them to rely on in a parenting role? There are many questions and they all need answering.

For one family, raising their special needs child was a full-time challenge.  The couple sought out others in their same situation, noting that often even their own family members could not relate to their daily experiences.

Here’s what needs to be top-of-mind when planning for a special needs child:

Don’t wait to plan. Families often think they have time, but you never know when unexpected events occur. Have a plan in place for legal guardianship, finances, and health care.

Work with experienced legal help. You want to work with an attorney who has a great deal of experience and knowledge in special needs law and estate planning.

Stay in control. When children turn 18, they are adults. Parents and guardians will need to go through court to become the child’s guardian. Unless that is done, the parents and guardians will have no legal rights about the child’s medical, financial or other affairs. A successor guardian also needs to be named, so that when the parents are no longer able to serve, someone is in place to care for the child.

Create a Special Needs Trust. An attorney with experience in special needs planning will be able to work with the family to create and structure a Special Needs Trust (SNT). A disabled person may not earn enough to support himself, or the caregiver who remains at home to care for them and care-related expenses. The SNT helps to meet current needs and plan for future needs. The SNT is used to preserve eligibility for any means-tested state and federal benefits. It allows the individual to have a better quality of life, by providing for expenses that are not covered by their benefits.

It’s very important that no assets be left to the child in an inheritance. Any assets must be placed in the SNT. A well-meaning relative could put any eligibility for aid in jeopardy.

Parents and guardians also need to name a trustee and a successor trustee of the SNT. The person needs to be competent, good with money management, organized and focused on caring for the loved one. It cannot be an emotional decision.

Parents of special needs children are advised to create a Letter of Intent, a narrative that outlines their child’s likes and dislikes, strengths and weaknesses, activities and friends they enjoy and other details that will help them to continue an enjoyable life when their parents are gone.

Parent’s own estate planning must be done with an eye to maintaining the SNT and caring for their other children. This is a case when assets need to be distributed in a realistic and fair manner. Don’t wait until it is too late. Let our experienced Frankfort, IL estate planning attorneys help you plan for your family’s future.  Book a call!

Reference: Newsday(May 9, 2019) “Be ‘biggest advocate’: Parents plan future for adult children with special needs.”

Power of Attorney: Why You’re Never Too Young

When that time comes, having a power of attorney is a critical document to have. The power of attorney is among a handful of estate planning documents that help with decision making when a person is too ill, injured or lacks the mental capacity to make their own decisions. The article, “Why you’re never too young for a power of attorney” from Lancaster Online, explains what these documents are, and what purpose they serve.

There are three basic power of attorney documents: financial, limited and health care.

You’re never too young or too old to have a power of attorney. If you don’t, a guardian must be appointed in a court proceeding, and they will make decisions for you. If the guardian who is appointed does not know you or your family, they may make decisions that you would not have wanted. Anyone over the age of 18 should have a power of attorney.

It’s never too early, but it could be too late. If you become incapacitated, you cannot sign a POA. Then your family is faced with needing to pursue guardianship and will not have the ability to make decisions on your behalf until that’s in place.

You’ll want to name someone you trust implicitly and who is also going to be available to make decisions when time is an issue.

For a medical or healthcare power of attorney, it is a great help if the person lives nearby and knows you well. For a financial power of attorney, the person may not need to live nearby, but they must be trustworthy and financially competent.

Always have back-up agents, so if your primary agent is unavailable or declines to serve, you have someone who can step in on your behalf.

You should also work with an estate planning attorney to create the power of attorney you need. You may want to assign select powers to a POA, like managing certain bank accounts but not the sale of your home, for instance. An estate planning attorney will be able to tailor the POA to your exact needs. They will also make sure to create a document that gives proper powers to the people you select. You want to ensure that you don’t create a POA that gives someone the ability to exploit you.

Any of the POAs you have created should be updated on a fairly regular basis. Over time, laws change, or your personal situation may change. Review the documents at least annually to be sure that the people you have selected are still the people you want taking care of matters for you.

Most important of all, don’t wait to have a POA created. It’s an essential part of your estate plan, along with your last will and testament.  Our Homer Glen estate planning lawyers are here for you and your family.  May we help you?  Book a Call!

Reference: Lancaster Online (May 15, 2019) “Why you’re never too young for a power of attorney”

Common Estate Planning Mistakes to Avoid

Estate planning attorneys see them all the time: the mistakes that people make when they try to create an estate plan or a will by themselves. They learn about it when families come to their offices trying to correct mistakes that could have been avoided just by seeking legal advice in the first place. That’s the message from the article “Five big estate planning ‘don’ts’” from Dedham Wicked Local.

Here are the five estate planning mistakes that you can easily avoid:

Naming minors as beneficiaries. Beneficiary designations are a simple way to avoid probate and be certain that an asset goes to your beneficiary at death. Most life insurance policies, retirement accounts, investment accounts, and other financial accounts permit you to name a beneficiary. Many well-meaning parents (and grandparents) name a grandchild or a child as a beneficiary. However, a minor is not permitted to own an asset. Therefore, the financial institution will not name the minor child as the new owner. A conservator must be appointed by the court to receive the asset on behalf of the child and they must hold that asset for the minor’s benefit until the minor becomes of legal age. The conservator must file annual accountings with the court reflecting activity in the account and report on how any funds were used for the minor’s benefit until the minor becomes a legal adult. The time, effort, and expense of this are unnecessary. Handing a large amount of money to a child the moment they become of legal age is rarely a good idea. Leaving assets in trust for the benefit of a minor or young adult, without naming them directly as a beneficiary, is one solution.

Drafting a will without the help of an estate planning attorney. The will created at the kitchen table or from an online template is almost always a recipe for disaster. They don’t include administrative provisions required by the state’s laws, provisions are ambiguous or conflicting and the documents are often executed incorrectly, rendering them invalid. Whatever money or time the person thought they were saving is lost. There are court fees, penalties and other costs that add up fast to fix a DIY will.

Adding joint owners to bank accounts. It seems like a good idea. Adding an adult child to a bank account, allows the child to help the parent with paying bills if hospitalized or lets them pay post-death bills. If the amount of money in the account is not large, that may work out okay. However, the child is considered an owner of any account they are added to. If the child is sued, gets divorced, files for bankruptcy or has trouble with creditors, that bank account is an asset that can be reached.

Joint ownership of accounts after death can be an issue if your will does not clearly state what your intentions are for that account. Do those funds go to the child, or should they be distributed between heirs? If wishes are unclear, expect the disagreements and bad feelings to be directly proportionate to the size of the account. Thoughtful estate planning, that includes power of attorney and trust planning, will permit access to your assets when needed and division of assets after your death in a manner that is consistent with your intentions.

Failing to fund trusts. Funding a trust means changing the ownership of an asset, so the asset is owned by the trust or designating the trust as a beneficiary. When a trust is properly funded, assets funding the trust avoid probate at your death. If your trust includes estate tax planning provisions, the assets are sheltered from estate tax at death. You have to do this before you die. Once you’re gone, the benefits of funding the trust are gone. Work closely with your estate planning attorney to make sure that you follow the instructions to fund trusts.

Poor choices of co-fiduciaries. If your children have never gotten along, don’t expect that to change when you die. Recognize your children’s strengths and weaknesses and be realistic about their ability to work together, when deciding who will make financial decisions under a power of attorney, health care decisions under a Health Care Power of Attorney and who will best be able to settle your estate. If you choose two people who do not get along or do not trust each other, it will take far longer and cost more to settle your estate. Don’t worry about birth order or egos.

The sixth biggest estate planning mistake people make is failing to review their estate plan every few years. Estate laws change, tax laws change and lives change. If it’s been a while since your estate plan was reviewed, make an appointment to meet with your estate planning attorney for a review.

Do any of these mistakes sound familiar?  Let our experienced Orland Park estate planning attorneys help you avoid these mistakes and minimize the potential for disputes after your death; or worse, have your estate assets wasted through unnecessary probate costs and legal fees. We are here for you and your family.  May we help you?  Book a Call!

Reference: Dedham Wicked Local (May 17, 2019) “Five big estate planning ‘don’ts’”

Why Is the New Tax Law A Good Reason to Retire in Florida?

Florida is looking better every day, thanks to changes in the federal tax code. A newly enacted limitation on the deductibility of state and local taxes (SALT) is motivating people from high-tax states, like Illinois and New York, to explore new ways to reduce their tax exposure. That’s leading them to move to Florida. The change in the federal tax code, combined with Florida not having any personal state income tax, has become a key reason for the relocation of many to the Sunshine State.

The Miami Herald recently reported in the article, “Federal tax changes make the Sunshine State even sunnier,” that since the new tax law went into effect in 2018, many people have been considering relocating to Florida. There is good reason. Under the new rules, taxpayers, generally, can only deduct up to $10,000 of SALT as an itemized deduction, which is just a small part of what’s typically paid in these states.

Establishing Florida as your domicile isn’t that easy. While spending 183 days in Florida will help you become a resident, establishing domicile in a new state requires a bit more legwork. Developing a plan of action is crucial to ensuring a seamless process and avoiding penalty-invoking errors.

Moving your domicile to Florida doesn’t mean you must sever your ties with your former home state. Maintaining secondary residence, spending time with family and other activities can all continue, but must be judged against evidence that supports intent, facts and circumstances:

  • Keep good records, like diaries, monthly shopping and flight records to be able to prove that you’ve spent a minimum of 183 days in your new home state;
  • File a Florida Declaration of Domicile;
  • Buy a home in Florida, file for homestead and relinquish it in your previous home state;
  • Register to vote, get a Florida driver license, transfer your car registration and relinquish these rights in your previous home state;
  • File all federal income tax returns and any other state and governmental items with a primary Florida address;
  • Relocate your primary business activities to Florida, if applicable;
  • Open Florida-based bank accounts and move any safe deposit boxes;
  • Do the majority of your spending activities here, like shopping and charitable giving;
  • Get involved with religious and civic organizations in your new hometown; and
  • Update your estate planning documents.

Another major item when planning a relocation, is the lack of tax on transfers of wealth upon death, like an inheritance, or during life, such as a gift. The same states (like Illinois) that impose large income taxes also often impose inheritance and gift taxes that can tax up to 20% with lower exemption levels than at the federal level. While inheritance and gift taxes at the state level can be imposed on estate and gifts as low as $1,000,000, cumulatively, Florida doesn’t have these taxes.  Currently, the State of Illinois imposes a tax on estate and gifts in excess of $4,000,000.  This means that in high-tax states (like Illinois), estate and gift taxes could be imposed, even if there’s no federal estate tax imposed.

Adhere to the requirements mentioned above, so you aren’t still taxed in your former state. High tax states know they are losing residents, so they are likely to be more vigilant about making sure that newly-declared Florida residents meet all the requirements. Be ready to prove your residency, or face taxes from your previous, high-tax state.

If you are interested in discussing the possibility and benefits of becoming a Florida resident, please give a call to Michael T. Huguelet, P.C.  We have lawyers licensed to practice in the State of Florida; and, who have actually practiced in the State of Florida.  We look forward to helping you make your decision.

Reference: Miami Herald (February 22, 2019) “Federal tax changes make the Sunshine State even sunnier”

Why Is a Revocable Trust So Valuable in Estate Planning?

There’s quite a bit that a trust can do to solve big estate planning and tax problems for many families.

As Forbes explains in its recent article, “Revocable Trusts: The Swiss Army Knife Of Financial Planning,” trusts are a critical component of a proper estate plan. There are three parties to a trust: the owner of some property (settler or grantor) turns it over to a trusted person or organization (trustee) under a trust arrangement to hold and manage for the benefit of someone (the beneficiary). A written trust document will spell out the terms of the arrangement.

One of the most useful trusts is a revocable trust (inter vivos) where the grantor creates a trust, funds it, manages it, and has unrestricted rights to the trust assets (corpus). The grantor has the right at any point to revoke the trust, by simply tearing up the document and reclaiming the assets, or perhaps modifying the trust to accomplish other estate planning goals.

After discussing trusts with your attorney, he or she will draft the trust document and re-title property to the trust. The assets transferred to a revocable trust can be reclaimed at any time. The grantor has unrestricted rights to the property. During the life of the grantor, the trust provides protection and management, if and when it’s needed.

Let’s examine the potential lifetime and estate planning benefits that can be incorporated into the trust:

  • Lifetime Benefits. If the grantor is unable or uninterested in managing the trust, the grantor can hire an investment advisor to manage the account or a spouse, child, trusted friend or a trust company to act for the grantor.
  • Incapacity. A spouse, child, trusted friend or trust company can be named to care for and represent the needs of the grantor/beneficiary. The spouse, child, trusted friend or trust company will manage the assets during incapacity, without having to declare the grantor incompetent and petitioning the Court for a guardianship. After the grantor has recovered, he or she can resume the duties as trustee.

A properly funded revocable trust is a great tool for estate planning because it bypasses probate, which can mean considerably less expense, stress and time.

In addition to a trust, please ask the attorneys of Michael T. Huguelet, P.C. about the rest of your estate plan: a will, powers of attorney, medical directives and other considerations.

The law office of Michael T. Huguelet, P.C. would be honored to sit down with you to discuss your needs and develop an estate plan to help you achieve what you want to accomplish.

Reference: Forbes (February 20, 2019) “Revocable Trusts: The Swiss Army Knife Of Financial Planning”

Why Do I Need a Will?

Estate planning is a very personal process. It is not a one-size-fits-all task. When a person has no close relatives (other than perhaps a spouse), the decisions needed to create an estate plan can be overwhelming. Kiplinger’s recent article, “No Children? Why You Still Need an Estate Plan,” provides some ideas, if you find yourself struggling:

Incapacity. Everyone should have an advanced directive for health care and a durable power of attorney for legal and financial decisions. These let you decide who will be in charge of your medical and legal affairs, in the event you are no longer able to make these decisions for yourself. If you become incapacitated without these documents, your relatives will be involved in a guardianship or conservatorship proceeding to appoint someone (who you may not know) to make these decisions for you.

Trusts. This is a legal document that can be used to manage many of your assets during your life, and facilitate the distribution of your assets when you pass away. A trust has two big advantages: it often helps avoid probate at your death and allows you to distribute your assets privately. Without at least a will, your family (as determined by the state intestacy laws) could inherit your assets. The best way to avoid these issues is to create a trust.

Deciding What to Do with Your Assets. This can be a tough decision.  Children often want to make sure that their parents are cared for. However, since many of us will survive our parents, successor beneficiaries must be named. Nieces and nephews are typically beneficiaries, when there are no children. However, you may want to consider friends, pets and charities. Talk to the estate planning attorneys at Michael T. Huguelet, P.C. to review the best way to leave your assets.

Charities. These can also be included in your estate plan. Charitable bequests can be either a specific bequest for a general or specific purpose. If the charitable gift is sizable, contact the charity beforehand to be certain your gift is used, and recognized, in the way that makes you most comfortable.

Pets. Your estate plan can also help establish who will take care of your pets, when you’re no longer here. You can leave the pet and some money to a trusted friend or family member, or you can create a formal pet trust to provide for your pet. Either way, create a plan so your pet can be properly cared for, if you are no longer able to do so.

When it comes to estate planning, you can decide who will inherit your assets. To be certain your wishes are executed as you intended, it is important to have the proper planning in place to avoid probate and allow for an efficient transfer. The attorneys at Michael T. Huguelet, P.C. would be happy to sit down with you, and assist with the decision making process so you have piece of mind that your assets are left to those who mean the most to you.

Reference: Kiplinger (February 11, 2019) “No Children? Why You Still Need an Estate Plan”

Moving to a Care Community? Check the Fine Print

Reading the fine print when purchasing a home in a retirement community or a care community is intimidating. The typeface is tiny, you’ve got boxes to pack and movers to schedule and, well, you know the rest. What most people do, is hope for the best and sign. However, that can lead to trouble, advises Delco Times in the article “Planning Ahead: Moving to a care community? Read the agreement.”

If you don’t want to read the fine print or can’t make head or tails of what you are reading, one option is to ask your estate planning attorney for assistance. Without someone reading through and understanding the contract, you and your family may be in for some unpleasant surprises. Here are some things to consider.

What kind of a community are you moving into? If you are moving to a Continuing Care or Life Care Community, your documents will probably have provisions regarding health insurance, entry fees, deposits, a schedule of costs if you need additional services, fees for moving to a higher level of care and provisions for refunds.

When you enter an assisted living facility, you may find yourself signing documents regarding everything from laundry policies, pharmacy choices, financial disclosures and statements of your rights as a resident. Not every document you sign will be critical, but you should understand everything you sign.

If moving into a nursing home that accepts Medicaid, you and your family should speak with an elder law attorney who can make sure you have completed the Medicaid application correctly and are in full compliance with all of the requirements.

Almost all agreements will say that the applicant, or the person receiving services, is responsible for payment from their own assets.  If someone signs the document who is not the applicant/future resident, that person may become responsible for the costs, depending upon what role you have when you sign: are you a guarantor or indemnitor? That person typically agrees to pay after the applicant/resident’s funds are exhausted. The payments may have to come from their own funds. Sometimes the “responsible party” is simply the person who handles business matters on the applicant’s behalf. You’ll want to be sure that everyone understands what they are agreeing to so as to avoid any surprise.

If possible, the person who will receive services should be the one who signs any paperwork, but only after a thorough review from an experienced attorney.  The attorneys at Michael T. Huguelet, P.C. would be happy to review any contracts or other documents to provide you and your family members piece of mind when evaluating such a transaction.

Reference: Delco Times (Feb. 5, 20-19) “Planning Ahead: Moving to a care community? Read the agreement”

Four Retirement Issues for 2019

A host of new retirement savings options will be on the horizon for millions of Americans whose workplace does not offer 401(k) plans, says The New York Times in “For American Workers, 4 Key Retirement Issues to Watch in 2019.” The article takes a broad view of retirement policy topics, covering everything from Congress working on a plan to stop sharp cuts in traditional pensions, to the SEC’s battle over fiduciary responsibilities to protect investors and the possible expansion of Social Security.

Here are some of the highlights:

Workplace Savings Plans. Features like automatic enrollment and matching employer contributions make these plans a great way to help save for retirement. However, a third of workers in the private sector don’t have access to these plans. In 2019, some states are starting programs to automatically sign up workers who don’t have access to these plans at work. Employers in some states will be required to set up automatic payroll deductions, although they won’t have to make matching contributions.

Congress is expected to work on legislation that would make it easier for employers to create and join a single 401(k) plan that they could offer. This “open multiple-employer plan” would be offered by private plan custodians. It may take a while for this to get up and running.

Pension Insolvency Crisis. A special congressional committee is working on heading off an insolvency crisis that could lead to big cuts in pension benefits for millions of workers. More than 10 million workers and retirees are covered by multi-employer plans, which are severely underfunded. The Pension Benefit Guaranty Corporation, a federal insurance program for pensions, will run out of money by 2025, if nothing changes. This is a complex problem, with no easy solution.

Protecting Investors. This battle over requiring fiduciary standards by brokers has been going on for a while. It centers on requiring brokers and others to put customer’s financial interests first. A rule from the Department of Labor from the Obama era never made it past opposition from the financial services and insurance industries. A proposed new rule from the Securities and Exchange Commission would require brokers to put their customer’s financial interests ahead of their own. However, it does not require them to act as fiduciaries. Consumers advocates are against this rule, believing that it does not go far enough.

Expanding Social Security. Expansion legislation in the Larson Bill from has more than 170 co-sponsors in the House. The bill includes a 2% increase in benefits, a generous annual COLA (Cost of Living Adjustment) and higher minimum benefits for low-income workers. How are we paying for these increases? The cap on wages subject to taxation and a gradually phased-in higher payroll tax are the sources.

Regardless what happens (or does not happen) in Washington, if retirement is in your future, 5 or 50 years from now, this is the year to have your estate plan created and ramp up your savings.

Resource: The New York Times (Dec. 23, 2018) “For American Workers, 4 Key Retirement Issues to Watch in 2019”