When you think about the future care giving for your child with Autism, you certainly understand that you must pass as much of your assets and money to them as possible to provide them the best possible life when you are no longer here. When we think about this transfer of money, we think of setting up a Will and possibly a Special Needs Trust. These two legal tools are most likely necessities in that process, but they are not the only tool you must use due to the fact there are several other ways that assets and property may pass at your death.
It is imperative that you are aware of these other ways so that you make conscious and educated decisions in order to ensure the best future for your loved one. For instance, certain real estate, bank and brokerage accounts may include survivorship rights meaning that when one joint owner dies, the property automatically shifts to the other joint owner, so that person now has 100% ownership in that asset.
Another way that assets pass at your death is through a Beneficiary Designation. You will find Beneficiary Designations on Life Insurance policies, and retirement accounts such as IRAs and 401(k)s. It is very common to name individuals as your beneficiary, such as a spouse, child or family member. Naming a child under the age of 18 takes the control of that asset out of your hands and puts into the hands of a 3rd party judge. Due to the fact you left money to a child under the age of 18, the court system will decide who oversees this money, how it is used, and then will disburse all that money to your child at age 18. If this occurs, and your child with Autism receives this money on their 18th birthday (and the amount totals more than $2,000) they will forfeit government benefits like SSI and Medicaid. You can avoid this by understanding more about how your property is owned, and by taking action on your beneficiary designation form.
Contingent Beneficiaries
It is critical to name Secondary and Tertiary beneficiaries. If you are married, It is understandable to name your spouse as a primary beneficiary, but then who do you name as the secondary beneficiary? We now know we do not want to name a child under the age of 18 as a beneficiary, and we certainly do not want to name your loved with Autism or else we can jeopardize government benefits. You can certainly name a family member, so that then that person will use the money to care for your child. The only concern with that is the money or property that you pass to that person becomes their asset. The danger with this situation is that if that person goes through a divorce the money you allocated for your loved one is a marital asset and will most likely be split in the divorce agreement which means your child does not have enough money to live the life you want for them. The other danger is if that family member is ever named in a lawsuit, the money you left them to help provide care your child will be susceptible to that lawsuit. For most families, the safest and most controlled way to secure your money is passed properly so as to provide for your child is through a Special Needs Trust. (Please seek counsel from a qualified Special Needs attorney is the design of such a trust.)
A Cautionary Tale
A Father visited an attorney to draft a Special Needs Trust so that he would protect his son’s future and always secure his future government benefits. The attorney designed, created, and drafted a Special Needs Trust using the proper language and with all the necessary provisions. They even named a family member as a Trustee and also named a Corporate Trustee to handle the administration of the trust so that it will always stay qualified as a Special Needs Trust as the government benefit landscape changes. The trust was well thought out and brilliantly designed.
The Father felt very secure. The Father died.
All his assets were transferred to the Special Needs Trust for the benefit of his son. . . All his assets except for an old IRA. An IRA is an account that does not pass through the Will, but instead passes through the Beneficiary Designation. This Father never changed the beneficiary designation after his son’s trust was created. The IRA Beneficiary was his son! This means that the IRA passed directly to his son, and because this retirement account had a value of $85,000, his son lost all his government benefits.
Everything his Father was trying to avoid happened because a small detail was not completed.
Although Beneficiary Designations are a small detail, not understanding how to use them appropriately for a family with a loved one with Special Needs, can be catastrophic to the future life of your loved one! Please review all your accounts and adjust your beneficiary designations appropriately.
If you would like more information about Special Needs Planning and other “small details”, please email Ryan at rplatt@aspecialneedsplan.com or visit the website www.ASpecialNeedsPLan.com.
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