Estate Planning Explained

Comprehensive planning for our loved ones encompasses three different professional disciplines:

1. legal planning (estate planning)
2. disability planning (creating a team of caregivers, benefits selection, management, and the letter of intent) and
3. financial planning (knowing the financial commitments required to ensure an individual can live comfortably for their entire lifetime). 

There is a balance required for effective planning, much like that of a three-legged stool. It is imperative proper planning takes place to ensure an individual does not lose precious benefits. In addition, the needs and desires of other family members should also be considered so their goals and dreams can be accomplished as well.

It is also important to consider “Who will care for my child when I pass away”? And, other questions parents ask themselves…

• My child had an IEP, does that qualify them for public benefits? 
• Should my child stay in public school until age 22? 
• Will I be able to retire? 
• How will I ever retire? How do I get there?
• What would happen to my child if I became disabled? 
• Will my child need to live with me forever? 
• Could my child lose public benefits? 
• Can’t their siblings just inherit the money and take care of them? 
• What if they can work? 
• How do I choose a guardian or trustee? 

Households that include members with a disability have a higher cost of living. Data from the National Disability Institute indicates the average household that includes someone with a disability needs 28 percent more income or an additional $17,690 to achieve the same standard of living as a household of the same size and income where no one has a disability.

Wills & Trusts

A traditional will states what will happen to assets and property when you pass away. A living will, is a legal document designed to direct loved ones (agents) on how to handle certain aspects of your life if you become incapacitated, such as healthcare.

For example, in the case of a parent having a will, the will:

• Allows you (as parents) to direct the distribution of property and leave assets to your children, grandchildren, charities, or other heirs. 
• Allows you to name a guardian for your minor children. 
• If you die without a will, state law determines how to distribute your assets. 
• A child with disabilities would likely receive assets of more than $2,000 and become ineligible for SSI, Medicaid, and DSPD 
• Make sure you include language in your will and/or revocable trust that says any distribution to your child with disabilities shall be distributed for their benefit to their Supplemental Needs Trust.

Living Will

A Living Will is a legal document that lays out your preferences regarding health care, such as your refusal or acceptance of medical treatment, in addition to the optional selection of a chosen agent or decision maker. Utah’s Advance Health Care Directive also includes a living will.

Special Needs / Third Party Supplemental Needs Trust

A young adult receiving SSI will lose benefits if they retain more than $2,000 in assets in their name. Two options discussed in the UPC Choices book that can assist families with navigating financial resources are ABLE Accounts and Supplemental Needs Trusts. The disability community commonly refers to this type of trust as a Special Needs Trust, when in fact, they mean a Third-Party Supplemental Needs Trust.

This type of trust is a legal arrangement that allows an individual with a disability to have access to funding without potentially losing the benefits provided by public assistance programs like SSI, Medicaid, or Medicare. The wording in these trusts has to be exact and very specific and in alignment with Medicaid language. A Supplemental Needs Trust can be used to cover the supplemental needs of a person that are not covered by public assistance programs. The assets held in the trust are not considered countable resources when qualifying for public benefits. Distributions from the trust should not be used to pay for items or services covered by any public benefit; for example, shelter and food.

Some things to consider are: 

• Work with a qualified Estate Planning Attorney and Financial Planner to create a plan that meets the needs of your family
• No limits on contributions; Income generated is taxable 
• No Medicaid payback 
• Trusts are managed by someone other than the beneficiary 
• There could be start-up costs/trustee fees

A Revocable Living Trust

Is a trust created by an individual (called a grantor, usually the parent) that can be changed over time. Revocable trusts are used to avoid probate and to protect the privacy of the trust owner and beneficiaries. You can have a supplemental needs trust that is revocable or irrevocable. A revocable trust becomes irrevocable after the grantor passes away.

An Irrevocable Trust

Describes a trust that cannot be modified after it is created without the trustee’s consent.

Third-Party Trust

“Third Party” refers to the individual who is establishing and funding the trust. For example, when a parent places assets in a third-party supplemental needs trust, they are acting as a third party. The beneficiary, or the person with a disability, is the first party. With a third-party trust, Medicaid does not have a claim on trust assets for Medicaid payback.

First-Party Trust

“First Party” refers to the individual with a disability. A first-party special needs trust typically has a Medicaid payback provision after the beneficiary passes away. For example, these types of trusts are sometimes used when an individual with a disability receives a large legal settlement due to injury and requires Medicaid. The legal proceeds are placed in a first-party special needs trust such that the beneficiary can remain eligible for Medicaid. After the beneficiary passes away, Medicaid has a claim on trust assets to pay back for services received.

Just a reminder… 

When establishing your estate plan, you must work with a qualified estate planning attorney who is engaged in drafting Supplemental Needs Trusts on a regular basis. For most families, the Third-Party Supplemental Needs Trust is most appropriate. 

Keep your documents updated

Laws and circumstances change. Your legal documents, letter of intent (discussed in the following three pages), and Care Notebook (discussed in the blue Health section of this book) should be revisited and amended with each change in life. It would be a good idea to sit down with your documents each January and update any areas that may need to be revisited.