Adult Children with Disabilities: Creating a Support System

March 27, 2023Filed Under: Elder Law, Estate Planning, Special Needs

Growing numbers of people with disabilities live in the United States, and planning for an adult child’s future well-being is a responsive, continuous process. A Journal of the American Medical Association reports the life expectancy of adults with Down Syndrome has increased from 25 in 1983 to 60 in 2020. The same study cites that those with cerebral palsy, the most common motor disability of US children, may often live into their 50s.

The ever-increasing life expectancies of adults with disabilities mean that comprehensive special needs planning requires short and long-term planning to lay the foundation of five key elements to ensure a successful support system:

Vision
Living Accommodation
Government Resources
Private Financial Resources
Legal Needs

Vision

How do you envision your adult child’s life after you’re gone? As you define and refine your vision to the extent possible, you should involve your child in the process. It’s important to focus on the strengths and abilities of the adult child, not just the challenges of their disabilities. This involvement helps promote self-esteem and independence to the highest degree possible.

Letter of Intent (LOI)

Although this letter is not a legal document, it provides key instructions and information about your child’s routines, preferences, and wishes. The LOI can and should be extremely detailed, including identifying caregivers, medical information and providers, and other individuals in their lives who may be a good fit to care for or support your child. Reviewing and updating the letter at least every two years or when significant changes occur is good practice.

Supported Decision-Making

If your adult child is capable and in charge of decision-making, selecting a team of trusted advisors is still important. This team may include family members, professionals, friends, and community services who all participate in your adult child’s success. The National Resource Center for Supported Decision-Making has information about the right to make choices by state.

Living Accommodation

Where your adult child will live depends on several factors, including their disability type and available financial resources. If your child currently lives in your home, don’t wait until you die to have them move into and experience a new home. Moving can be a tough experience while you are alive but catastrophic when you are gone.

Housing Options

Your home – It’s great if you can leave your residence to your child in a special needs trust as long as it also contains enough money to cover ongoing property maintenance, taxes, and other costs.
Another home – You might purchase a townhouse or condo for your child and hold the property in a special needs trust.
Section 8 vouchers – This federal program provides housing in the community to low-income people; however, wait lists can be long.
Group homes – Adults with disabilities can use private money or Medicaid payments to live in a group home. In some cases, this living situation also has counselors and other staff that can help residents live as independently as possible.
If assisted living is a requirement, a special needs attorney can help identify options.

Government Resources

Creating a schedule of the individuals, services, and organizations that have become your adult child’s support system and how they are financed makes your vision for your child a reality. You can be creative, and pair speech, physical, and occupational therapists, as your child’s abilities develop more fully. Much of your child’s resources throughout adult life will depend on the continuation of government programs that provide the support and services they need.

Government Assistance Programs

It’s wise to involve a special needs attorney to explain how to properly manage these resources to preserve your child’s access to government programs.

A person with developmental disabilities can often access the Supplemental Security Income (SSI) program, which guarantees a minimum income to qualifying low-income recipients. A representative payee can assist those individuals who are unable to manage their finances.

To be eligible for Medicaid benefits, the recipient must have a limited income and assets (assets not protected by ABLE or Special Needs Trust accounts) and covers a broad range of healthcare costs.

Maintaining eligibility standards and managing these benefits may be more than your adult child with disabilities can manage. Identifying a reliable candidate and creating the structure that legally permits them to facilitate these programs is crucial to your child’s future well-being.

Many US military personnel have experienced serious physical and mental health problems since serving in Iraq and Afghanistan. A large percentage of these service members are unmarried and under thirty. For parents of veterans with disabilities, look into the Veterans Disability Compensation program.

There is also a benefits program for veterans with permanent disabilities, which is needs-based. The Veterans Disability Pension has eligibility requirements based on your adult child’s assets and income. A veterans specialist or disability attorney can create a special needs trust to ensure your adult child can qualify.

Many other government programs are available to help your adult child with disabilities have a successful future. A special needs attorney can explain more about discrimination protections outlined in the Americans with Disabilities Act (ADA), the Affordable Care Act (ACA), the Ticket to Work Program, and more.

Private Financial Resources

Parents of children with special needs have additional planning requirements to ensure the safety and success of their child’s life when they are no longer alive to oversee that child’s well-being. Creating a realistic strategy is key to success. Begin with creating a general framework with a special needs lawyer and then fill in the financial details. Financial resources may include life insurance policies and other investment strategies, such as funding an Achieving a Better Life Experience (ABLE) account. The cash flow these accounts create will allow your adult child to continue living a life of safety, purpose, and impact after you are gone.

Additionally, your lawyer can create a special needs trust appropriate for your family’s financial situation and child’s needs. This trust type provides additional monies to your adult child without them losing eligibility for government benefits. There are various special needs trust types, including:

Third-Party Special or Supplemental Needs Trust (SNT)
First-Party Special Needs Trust or Self-Settled SNT
Pooled Special Needs Trusts

Legal Needs

There are several legal tools that parents can use to create a lifelong plan for their adult child with disabilities, including:

Guardianship
Conservatorship
Special Needs Trusts
Advance Health Care Directive
Durable Power of Attorney

It’s important to consult with an attorney who has experience with special needs and disability law to determine the best option for your adult child’s future specific needs and situation.

Conclusion

Planning for your child with special needs is customized to your family circumstances and your child’s unique needs. Legal guidance is critical because missteps can lead to ineligibility for crucial government benefits programs. To provide for your child’s future success after you are gone, speak to a special needs or disability attorney and begin your proactive planning.

We hope you found this article helpful. If you’d like to discuss your particular situation, please don’t hesitate to reach out. Please contact our Cincinnati office by calling us at 513-771-2444 and schedule a consultation. We look forward to the opportunity to work with you.

In Case of Incapacitation, Who Should Make Financial Decisions for You?

March 20, 2023Filed Under: Estate Planning

How can you ensure your financial well-being when you are unable to? A power of attorney (POA), otherwise known as an agent to your principal, has the legal authority to represent and make decisions on your behalf. What characteristics should you look for when designating a power of attorney? No matter what type of power of attorney you seek to arrange, your potential agent must be a person you deem to be trustworthy and honorable to conduct your affairs in your best interest.

Often the principal who designates the POA may prefer to choose a family member such as a spouse or adult child. If a family member is unable or unwilling to act when needed you can name a trusted friend or retain professional representation to ensure your interests are well looked after. Some people choose to have co-agents or name a secondary agent in the event another might pre-decease them.

Stipulations regarding the selection of a POA are minimal. Your chosen power of attorney must meet two legal thresholds; be an adult and not be incapacitated. There are no special qualifications regarding financial acumen or legal knowledge, and in fact, integrity is considered the most important attribute when selecting your agent.

Some questions to consider beyond your basic level of trust with this person(s) include:

How does this person manage their own legal and financial responsibilities? Are they financially responsible? Do they lead a steady life? Are they good at making decisions under pressure?
Will the person you select charge you a fee for their service? Generally, family members will not but, if you choose professional representation such as a financial planner or an attorney, there is usually a fee associated with their expertise and service.
Is the person you want to represent you willing to do so? Becoming an agent is a big responsibility to accept, and for many reasons, the person you want may not agree to serve as your agent.

Your power of attorney agent can have broad or limited legal authority to make decisions and transactions on your behalf about your property, finances, and medical care. The agent’s power is derived through your permissions, and if you are dissatisfied with your agent, you can terminate the POA/agent relationship and create a new one. Your power of attorney must comply with state law. When you work with us, we will make sure yours complies with all applicable laws.

There are a few misconceptions about the power of attorney. The first is you can create a POA on your behalf after you are incapacitated. You cannot as it is too late. For your power of attorney to be valid, your agent must be appointed before you become incapacitated through illness or disability. If you do not have your POA agent legally in place and are unable to manage your affairs, it may become necessary for a court to appoint someone to act on your behalf. People appointed to represent your interests in this manner are referred to as guardians, conservators, or committees, depending on your local state law. To avoid someone making decisions for you whom you may not have chosen, it is imperative to have the proper power of attorney legally in place before you become incapacitated.

Another misconception is that your POA agent can make whatever financial decision they want to about your estate and that all power of attorney documents are the same. Your selected agent, by law, has an overriding obligation known as a fiduciary obligation to make decisions in your best interests. This responsibility is why it is imperative to choose a trustworthy agent as it can help avoid challenges to and litigation of your estate. You must have full confidence in the actions your agent will take on your behalf. You can appoint different agents for different POA document functions. We can help you figure out which powers should be given to particular agents. For example, you may want a different agent to handle real estate transactions on your behalf.

Selecting an agent and preparing a financial power of attorney is an important part of your overall plan. We would be happy to help you and welcome your call. Please contact our Cincinnati office by calling us at 513-771-2444 and schedule a consultation. We look forward to the opportunity to work with you.

Wills Are Not Just About Transferring Assets

March 13, 2023Filed Under: Estate Planning

57% of U.S. adults do not have a Last Will & Testament (a “Will”), according to Care.com’s estate planning survey. The survey found that participants were more likely or less likely to have a Will depending on issues such as age, race, and education. For example, when broken down generationally, 66% of people aged 65 and older, comprising the Baby Boomer generation and The Greatest Generation, have a Will, better than the overall average. Only 39% of the participants that fell into Generation X and 18% of the Millennial participants have a Will, well below the overall average.

The survey participants that did not have a Will gave many reasons why. The overwhelming answer was that they just had not gotten around to it. This answer was given 52% of the time. The next most common reason, given 22% of the time, was that they did not think they had enough assets to need a Will. The cost of making a Will was given as a reason 6% of the time, which was one of the least given answers.

Understanding the Power of a Will

The survey points out a major flaw in understanding the power of a Will. Most people have a basic understanding that a Will transfers assets you own when you die to the people outlined in your Will. Based on this oversimplified explanation of a reason to have a Will, it is easy to understand why younger people and people who have not yet amassed many assets misbelieve they do not need a Will. Never mind that anyone can die at any time, or that you own more than you realize and you want to have someone named to deal with all your stuff.

More importantly, anyone with a minor child should use a Will to name a Guardian for that child. Whether you are married to or divorced from the child’s other parent, naming a Guardian in case of your death is paramount. If the child’s other parent or adoptive parent is alive and still has parental rights when you die, the child stays with that parent. However, if the child’s other parent is dead or does not have parental rights, then the person nominated as Guardian in your Will is the only person that can stand up in guardianship court and definitively say that you believed your minor child’s custody should transfer to them. Then, since you are making a Will, you might as well also state who should inherit any assets you might own.

Creating a Will is a simple process when you engage experienced attorneys like us. Sometimes you know the best person to care for your child. Sometimes you need help picking between family members, or you do not have family members to choose from. We are not here to just fill out a Will form for you. We are here to help you and guide you through whatever issue is preventing you from making a Will. Please contact our Cincinnati office by calling us at 513-771-2444 and schedule a consultation. We look forward to the opportunity to work with you.

A Guide to Understanding Tax on Generation-Skipping Transfers

March 6, 2023Filed Under: Estate Planning, Taxes

In the US, generation-skipping transfer (GST) is the US government’s tax on transfers of property that skip a generation. Its primary design is to prevent wealthier individuals from avoiding estate and gift taxes by transferring large amounts of assets to their grandchildren, bypassing their children. The GST tax applies on top of all other applicable estate or gift tax, and its calculation is a percentage of the transfer’s value. The tax ensures that transferred wealth has tax consequences from generation to generation.

Benefits

Even though GST can have tax consequences, there are still several benefits when implementing a generation-skipping transfer:

Estate Tax Savings – This type of transfer may allow a person to reduce or eliminate the estate tax liability.
Asset Protection – The transferor may be able to protect those assets from creditors or other potential claims.
Wealth Continuation – Skipping a generation may ensure that the property remains in the family for multiple generations.
Property Control – When transferring property to a trust, the transferor may retain some control over the property, even after the transfer.

It’s important to understand that the specific benefits of implementing a GST tax plan will depend on the individual’s specific circumstances. Consult an estate planning attorney to determine the best plan for generational wealth transfer.

What is a “Skip Person”

Skipping the immediate child’s generation and naming grandchildren as beneficiaries allows inheritable assets to skip one generation of the estate tax. The person in the generation being bypassed is the “skip person.” In 1986, the IRS Internal Revenue Code (IRC) began applying a flat tax on generation-skipping transfers. A grandfather clause permits older irrevocable trusts from being affected by the GST tax.

The GST can also apply to direct transfers to these beneficiaries and any gifts made to them through a trust. Therefore, under certain circumstances, some trusts can also be a “skip person.” There are exceptions for those descendants who are grandchildren of parents who have predeceased them. In this instance, the children effectively “move up,” taking their parents’ place, so the GST tax no longer applies to them as the gift doesn’t skip a generation.

It’s important to note that the IRC provides GST tax exclusions, as it does with gift taxes. In 2023, the GST lifetime exemption excludes the first $12.92 million, whereas the gift tax exclusion annually allows $17,000 tax-free per person. Married couples may double the amount because the tax-free status applies to each person gifting.

How does the IRS Assess the tax, and who pays the GST?

GST calculations are currently a flat rate of 40% which is equal to the estate and gift tax rate on transfers above the lifetime GST tax exemption amount. According to the IRS, the 2023 federal estate, gift, and GST basic exclusion amounts are $12,920,000 per person. This lifetime GST tax exemption amount will grow annually through 2025 based on inflation rates. Without Congressional action, the exemption amount in 2026 will revert to a $5,000,000 baseline, indexed for inflation.

Some states collect generation-skipping transfer taxes. Typically this occurs in states that already impose estate taxes. These states may continue mimicking federal GST regulations and revert to a $5 million baseline in 2026, although some states may act independently.

If the assets and money are in a direct GST, the trust grantor, who opens and funds the trust, will set up provisions to pay the tax. If assets are in an indirect GST, the skip beneficiary (usually a grandchild) is responsible for paying the tax; however, they may pay out of inheritance proceeds.

Using a Lifetime Exemption from GST

The lifetime exemption offers some advantages as it can apply to any combination of transfers during your life or those made at the time of death. Two potential strategies might be:

During your lifetime, you can gift up to $12.92 million into a trust that eventually distributes assets to your grandchildren. This strategy will shelter projected appreciation for future generations.
At your death, your testamentary trust may leave up to $12.92 million in lifetime trusts for your children. Upon their death, the trust’s $12.92 million (plus appreciation) passes to your grandchildren without incurring a GST or estate tax.

Although you don’t need much money to implement a GST tax plan, most people will never encounter the GST because of the high dollar threshold.

Why an Estate Planning Attorney is Recommended

While you aren’t legally required to hire a lawyer to handle your GST tax situation, you should consult with one. GST tax can be complex, and there are many rules and regulations. An estate planning attorney understands the tax implications of your planned transfers and ensures that your estate plan’s structure will comprehensively minimize your tax liability. Additionally, an estate planning lawyer can navigate any legal issues that arise and provide valuable advice on the best course of responsive action. Hiring an estate planning attorney to assist with the GST tax process is a sound strategy if you have a significant estate and are considering transferring assets to future generations.