Many individuals, whether young or old, are receiving valuable public benefits such as Supplemental Security Income (SSI) and Medical Assistance. Anyone who has gone through the qualification process for these types of entitlement programs is well aware that the application process alone can be a nightmare!
Sometimes, a well-meaning relative will leave an inheritance directly to a beneficiary who is receiving public benefits. This can be through a will, or possibly through a beneficiary designation on a bank account, a retirement account, or a life insurance policy. Other times, a person who is receiving public benefits will suddenly become the recipient of a lawsuit settlement – most often, due to a personal injury.
Unfortunately, these individuals will usually find that receipt of this money will immediately disqualify them from receiving the public benefits they depend on. Not only will the funds quickly disappear, but the individual must then go through the entire qualification process all over again once the money has been spent. In Wisconsin, the money cannot be gifted to someone else, nor can the money be disclaimed by the beneficiary without resulting in immediate disqualification. This series of events eventually leads to much frustration over something that should have been a relief.
There is a solution in Wisconsin to this dilemma: The funds, rather than passing to the individual outright, can instead be placed directly into a supplemental needs trust. While some situations warrant a private supplemental needs trust, most often the best solution is a WisPACT. The Wisconsin Pooled & Community Trusts (or “WisPACTs”) provide for the special needs of persons with disabilities without endangering their eligibility for public benefits.
Once the money is placed into a WisPACT, the trustee can make distributions to buy many goods and services for the individual. Note that there are restrictions on distributions from these types of trusts. For example, the trust may only be used for the individual, cash distributions are generally prohibited, and some public benefits programs limit or prohibit distributions for food, shelter, or housing.
However, the money in a WisPACT is available for many items that will make the individual’s life more comfortable. The following are some examples of distributions that may be made from a WisPACT: Travel expenses for vacations and holidays, uncovered medical and dental costs (including elective treatments, upgraded eyeglasses, etc.), educational expenses, appliances and furniture, an automobile for the individual’s benefit, home repairs, lawn maintenance and cleaning services, accounting and legal fees, and even extras like cable TV and electronics!
If you are interested in exploring the possibility of a WisPACT trust, it is essential that you talk to an attorney who specializes in estate planning right away. Once the money has been transferred directly to the individual, it may be too late to take advantage of this wonderful opportunity.
Friday, May 27, 2011
Thursday, May 19, 2011
Special Planning for Special Beneficiaries
In an ideal world, all of our children or other beneficiaries would be fully grown, responsible, and disability-free upon our deaths. However, we don’t live in a perfect world and unforeseen circumstances often exist. Whether your beneficiaries are minors, are receiving special needs assistance from the government based on a disability, or are otherwise not in the best position to manage an inheritance, there are plenty of great solutions available through proper estate planning.
If your beneficiary is a minor (or simply too inexperienced to manage money, even if over age 18), a good estate plan will set this beneficiary’s inheritance aside in a trust. You can appoint the person or institution that will be responsible for managing the assets until your young beneficiary reaches an age at which he or she is more capable of managing assets. In the meantime, you can make the funds available for expenses such as support, health care, and education if you desire to do so. Considering that the average inheritance is spent within 18 months (yikes!), some clients even prefer a staggered distribution approach – for example, perhaps you wish to distribute one-third at age 25, another third at age 30, and the final third at age 35.
Did you know that, if your beneficiary is receiving special needs assistance such as SSI or Medical Assistance, leaving an outright inheritance could disqualify him or her from receiving these valuable governmental benefits? However, we don’t have to disinherit special needs beneficiaries. Rather, a good estate plan will set aside this beneficiary’s inheritance in a special needs trust. You can appoint the person or institution that will be responsible for managing the assets. Sometimes referred to as a “luxury trust”, the funds can be available to your beneficiary for those things that the government will not provide and that will make your beneficiary’s life much better. For example, the funds may be available for travel, for special classes, for housekeeping services, or even for a new TV! In the meantime, your beneficiary will not be disqualified from receiving his or her benefits.
Finally, some of us have loved ones who, for one reason or another, based on life choices, have demonstrated that they are just not good with money. There are many solutions available for this situation as well. For example, the funds for this type of beneficiary can be set aside in a creditor protection, or “spendthrift”, trust. You can appoint the person or institution that will be responsible for managing the assets. Sometimes, this type of trust is a lifetime trust and the appointed trustee can determine what the funds can and cannot be used for. In the meantime, if your beneficiary gets sued or divorced, the trust assets may be unavailable to satisfy these obligations. Whatever amount is left over upon the death of your beneficiary will be distributed to the successor beneficiaries of your choice.
At the minimum, considering the divorce rate is still about 50%, why not give all of your beneficiaries the option of keeping their inheritance protected in the event of a future divorce?
Keep in mind that your documents must contain very specific legal language to accomplish the above goals, so it is essential to have an estate planning attorney draft the proper provisions to avoid unintended consequences. Each family is very different, and your estate plan should certainly be unique and tailored to your particular circumstances!
If your beneficiary is a minor (or simply too inexperienced to manage money, even if over age 18), a good estate plan will set this beneficiary’s inheritance aside in a trust. You can appoint the person or institution that will be responsible for managing the assets until your young beneficiary reaches an age at which he or she is more capable of managing assets. In the meantime, you can make the funds available for expenses such as support, health care, and education if you desire to do so. Considering that the average inheritance is spent within 18 months (yikes!), some clients even prefer a staggered distribution approach – for example, perhaps you wish to distribute one-third at age 25, another third at age 30, and the final third at age 35.
Did you know that, if your beneficiary is receiving special needs assistance such as SSI or Medical Assistance, leaving an outright inheritance could disqualify him or her from receiving these valuable governmental benefits? However, we don’t have to disinherit special needs beneficiaries. Rather, a good estate plan will set aside this beneficiary’s inheritance in a special needs trust. You can appoint the person or institution that will be responsible for managing the assets. Sometimes referred to as a “luxury trust”, the funds can be available to your beneficiary for those things that the government will not provide and that will make your beneficiary’s life much better. For example, the funds may be available for travel, for special classes, for housekeeping services, or even for a new TV! In the meantime, your beneficiary will not be disqualified from receiving his or her benefits.
Finally, some of us have loved ones who, for one reason or another, based on life choices, have demonstrated that they are just not good with money. There are many solutions available for this situation as well. For example, the funds for this type of beneficiary can be set aside in a creditor protection, or “spendthrift”, trust. You can appoint the person or institution that will be responsible for managing the assets. Sometimes, this type of trust is a lifetime trust and the appointed trustee can determine what the funds can and cannot be used for. In the meantime, if your beneficiary gets sued or divorced, the trust assets may be unavailable to satisfy these obligations. Whatever amount is left over upon the death of your beneficiary will be distributed to the successor beneficiaries of your choice.
At the minimum, considering the divorce rate is still about 50%, why not give all of your beneficiaries the option of keeping their inheritance protected in the event of a future divorce?
Keep in mind that your documents must contain very specific legal language to accomplish the above goals, so it is essential to have an estate planning attorney draft the proper provisions to avoid unintended consequences. Each family is very different, and your estate plan should certainly be unique and tailored to your particular circumstances!
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