Great Reasons to Update your Will Once in a While

The years really fly by. I can’t tell you how many times some one has come in to meet with me who signed a Will 25 years before and never updated it. When major changes occur in your life, it’s important to see your lawyer for a “check up” to make sure that your old Plan is still a good Plan for you. Here are samples of situations I have encountered, which required an updated Last Will and Testament and updated beneficiary designations on assets such as life insurance or tax-deferred accounts:

  1. Grandchild has severe disabilities, will be unable to support himself, and depends on programs that require Medicaid eligibility. An outright inheritance could be disastrous.
  2. Child has acquired substantial debt or is in the midst of a divorce.
  3. Beneficiary turns out to be a major spendthrift  and should have somebody controlling and managing his inheritance.
  4. You no longer have a relationship with the people you listed as your Executors.
  5. Your designated Executor or Trustee has passed away.
  6. You want to guarantee that certain charitable bequests will be made.
  7. You want to leave money to your grandchildren as “something special,” even though the rest of your estate will go to your children (their parents).
  8. You have a Will from the 1990’s that left the “credit shelter amount” locked up in a trust for your surviving spouse to minimize estate tax in the estate of the 2nd spouse to die, yet now, there is no NJ estate tax and no federal estate tax for almost everyone
  9. You left a beneficiary’s share in a Trust under your Will, but now she is older and fully capable of managing her own assets.
  10. Your spouse is going into a nursing home and you want to limit the amount s/he inherits if you pass away first.
  11. You got married, gave birth or adopted a child, or you want to leave some assets to your step-children.

Whatever has changed, family estate planning should be an ongoing process throughout your life, starting at age 18 and moving on from there.

Call us to set up a plan that works for you …… 732-382-6070

 

Caution! Assets in a guardianship account impact Medicaid and DDD eligibility

When a minor who has disabilities reaches age 18 and is incapacitated, their parent or custodian will typically file for Guardianship. In some cases, the minor has assets under Court control that are held in a guardianship court account through the county Surrogate. These might be assets that were received through a prior personal injury lawsuit award or settlement, or assets that the  minor had inherited. Upon reaching age 18, the court has to release those funds and they become available to the individual. The problem is that if the young adult requires Supplemental Security Income (SSI) Medicaid benefits or benefits from the DIvision of Developmental Disabilities (DDD) for health and residential services, s/he can’t have more than $2,000 in “available assets,” and these court account assets are “available” if the Guardian has direct and unfettered control and access for the disabled person’s benefit. That means that the individual who receives benefits while having all those assets is “wrongfully receiving benefits.” This can create a tremendous problem once the overpayment is discovered. Also, if the beneficiary dies,   Medicaid is required to pursue estate recovery when there are assets in an estate.

A 2015 decision by the Appellate Division examined the nature of such funds and why they are considered “available.” The case is called    IN THE MATTER OF THE  ESTATE OF TRACY SOLIVAN, DOCKET NO. A-4828-3T1 .Medicaid lien app div case Estate ofTracy Solivan  What happened here is that the funds in the court’s trust account were released to the Guardians when Tracey turned 18. She went on to receive about $5 million of services from Medicaid and DDD. At the time of her death, her Estate had $600,000 or so, and these agencies asserted a lien for reimbursement, thus wiping out the estate. The Court upheld the liens.

This was a preventable situation. Special Needs Trusts are designed to enable disabled people under 65 to transfer their “available assets” into a trust for their sole benefit and preserve eligibility for both Medicaid and DDD. The Trust has to be created by a parent, a grandparent or a court, or a Guardian with court permission. The Trust is restricted so that the funds can only be used to supplement but not replace what Medicaid, DDD and other means-tested programs will provide. While it is true that  the State has to be named as the first beneficiary of the special needs trust so it can be repaid after the death of the Medicaid recipient, in some cases the extent of benefits provided is less than the amount remaining in the fund at the death of the beneficiary.

In a case like this, the petition for Guardianship at age 18 would ask  the Court to establish the Trust so that the Guardian can fund it. And should it ever happen that assets arise later on, from a settlement, inheritance or what have you, the Guardian can always go back to Court to file this kinds of petition.

Timing is everything. Careful planning can prevent a crisis.

Call us for representation with special needs trusts, Medicaid eligibility and estate planning …. 732-382-6070

 

 

Not all Discretionary Trusts are Special Needs Trusts

Over the years in my practice I have encountered many situations in which a discretionary trust was written into a Will to receive the inheritance of a person who had disabilities. Often the testator (person who was signing the Will) specifically wanted to protect the funds becuse they knew the person with disabilities relied on government programs like Medicaid or SSI. However, since the testator is (usually) not a lawyer, they did not realize that those funds are only protected if they are in certain kinds of trusts. Further, the Trustee may not have realized this either, further compounding the problem. We have had to go to court many times to ask the Judge to repair a Trust to conform to the testator’s original intent, a costly and time-consuming process.

If a person receives benefits under means-tested programs such as Supplemental Security Income (SSI), Medicaid, or the state Division of Developmental Disabilities (DDD) DC3_2013 (1), assets in a trust for them will likely be counted as “available” unless they are held in a highly restricted trust called a Supplemental Needs Trust, which is sometimes referred to as a Special Needs Trust (SNT).  https://secure.ssa.gov/poms.nsf/lnx/0501120203  [In a previous post I discussed the difference between this and a first-party Special Needs Trust]. The SNT requires an array of specific restrictions. In general, if the assets are held in a general discretionary trust, the assets will be counted and the beneficiary can lose their benefits and be at risk for a State claim for repayment if they continued to receive benefits while the discretionary trust was in existence.

If you are the Trustee of a discretionary Trust — created, let’s say, under your parent’s Will – it would be a good idea to verify whether the Beneficiary is receiving benefits, as prompt legal steps might be needed to protect those benefits.

For advice on preparing, funding, and administering special needs trusts, call 732-382-6070