The Voice is the e-mail newsletter of The Special Needs Alliance. This installment was written by Pacheco, California, Special Needs Alliance member Stephen W. Dale, Esq. of The Dale Law Firm, PC. Steve is a disability rights advocate and attorney dedicated to providing quality estate planning. He is a frequent speaker on a variety of disability related topics across the country. Steve regularly teaches courses to the public, financial professionals, and other attorneys on special needs trusts and trust administration. Additionally, he serves as the trustee for the Golden State Pooled Trust. Steve offers numerous videos and handouts to the public and his colleagues at www.achievingindependence.com.
A question I often hear is, “How often should I have my child’s special needs trust reviewed by my attorney?” Let me give you the typical lawyer’s answer for almost every question, “It depends.” As unsatisfying as that response might be, the following information may provide you with some further guidance.
There generally are two levels of review to consider. The first is an annual review of your estate plan that you may undertake yourself or with the assistance of your financial or tax advisors who help with your overall financial planning. The second is meeting with your attorney to review the trust and your estate plan in general, which generally is done on an as-needed basis when a significant change occurs in your life or relevant changes occur in the law. For example, our estate planning clients who want to provide for a loved one with a disability typically create a revocable special needs trust to be funded upon their deaths or incapacity. Because the trust is revocable, it can be amended from time to time to cope with changes in the clients’ circumstances or the law. When a client signs a special needs trust, we often flag specific sections of the trust and give our clients instructions to review those sections annually to ensure that the trust remains up-to-date.
Here are some typical issues for you to review before consulting with your financial planner or attorney:
Annual Self Review – Questions to Ask Myself:
Are all of my assets properly titled?
You need to review your assets and confirm how they are titled to make sure that all of your assets, including those acquired after you signed your estate planning documents, are flowing properly through your estate plan. This is where a financial advisor can be invaluable. While it is important to assure that your assets, including real estate, retirement benefits, money market accounts, etc., reflect the proper owner or include correct beneficiary designations, it is especially critical when a special needs trust is involved. An error in title or beneficiary designation could cause unnecessary taxes, a lengthy probate and, in the worst of circumstances, the loss of governmental benefits and unnecessary and ongoing court supervision. For example, if an insurance policy lists as one of the beneficiaries your loved one with the disability, his or her share of the proceeds will be received directly instead of being protected in the special needs trust.
Is my plan practical?
There may have been significant changes in your financial situation after creating your estate plan. For instance, what happens if there have been major changes in your own circumstances while the needs of your disabled loved one have remained the same? If your finances have diminished, you may want to modify your estate plan concerning which assets you would like transferred into the special needs trust. You may wish to rework the trust’s directives and memorandum of intent to reflect what you now feel the trust management’s focus should be in light of decreased funding. You may also want to increase the portion of your estate allocated to the special needs trust and decrease the portion of your estate you intend to leave to other family members.
Are my named successor trustees and advisory committee members appropriate?
The most common change to a special needs trust we see in our office concerns changing the trustee, trust protectors or advisory committee members.
For example, ten years ago it may have made sense to appoint Uncle Eddy to serve as an adviser on financial investments. Now, Uncle Eddy might be in prison on federal racketeering charges, and it clearly is a good time to rethink your decisions. Luckily, most situations are not this extreme, but the point remains that lives can change drastically within a few short years. Accordingly, you should look at your trust annually to be sure it names people who best are able to perform the duties necessary to provide for and protect your loved one.
Have there been major changes in my loved one’s condition or benefits?
You should consider any changes in your loved one’s situation, including changes in government benefits, living arrangements, medical condition or support systems. If there have been significant changes to benefit eligibility, it is important to bring to the meeting with your attorney all official documentation from the federal or state agency related to the change. Your attorney will then will be able to focus on how the changes in benefits affect your loved one’s current and future situation as well as your overall estate plan. This meeting also will be a good time to review whether the trust beneficiary is receiving all of the benefits he or she is eligible for. In addition, if a loved one with disabilities has relocated to another state and plans to apply for benefits in the new location, it is important to ensure the trust is reviewed by an attorney in the new state to determine if changes to the trust are necessary to avoid an interruption in essential services.
Have there been changes in my ability to be my loved one’s advocate?
Many family members serve as the primary advocate for a loved one with disabilities. If there is a question regarding your ability to continue in this role, it is very important to discuss your situation frankly with your attorney. For example, what should you do if you have been diagnosed with a psychological condition (i.e., dementia or early stage Alzheimer’s) or possibly even a physical condition which might impede your ability to advocate for your loved one? Both for your sake and that of your loved one, you should make changes to your estate plan to anticipate your future inability to serve as the primary advocate. Engaging a care manager both to assess the overall benefits and support network for a loved one and to help the family plan for future contingencies is one of the most efficient, and in many cases, financially advantageous steps available. You may be able to locate a care manager by asking your attorney for a reference or directly through a helpful web site, aginglifecare.org.
Once you have performed this self-check of the family’s circumstances and your loved one’s anticipated needs and benefits eligibility, you will be able to determine if now really is the time to update your estate plan and special needs trust. Even if you decide to make no changes now, you certainly will be better prepared if or when circumstances later change on an emergency basis. As usually is the case, staying ahead of the game very likely makes a later review process much less stressful and costly.