Kent Larsson writes about the proper use of wills, advance directives, trusts, and other estate planning tools, and how how they play a vital role in you receiving proper medical care and helping you to preserve and pass on your assets to your loved ones.
Special needs trust may be answer to new tax reforms.
Some of the people who were concerned about the new tax reform law were people with disabilities, according to The Hill in "Restructured tax code would unduly burden people with disabilities."
However, the concerns raised in that article did not materialize. Not only will they see benefits from the doubling of the standard deduction in the plan, but their taxes might actually decrease due to another provision. The plan includes a provision to make the itemized deduction for health care expenses even better for them for tax years 2017 and 2018. The new tax law lowers the deductibility threshold from 10% to 7.5% of adjusted gross income.
Only in 2019 will the deductibility threshold revert to the former 10% of 2016.
There is something parents and grandparents of the disabled, as well as the disabled themselves, can do and that is create a special needs trust. These trusts do not ease anyone's tax burden but do allow people with special needs to have more income to help cover any increased taxes.
If you would like to learn more about special needs trusts, then talk to an estate planning attorney for the details about setting one up.
Reference: The Hill (Nov. 24, 2017) "Restructured tax code would unduly burden people with disabilities."
A special needs trust is restrictive and the third-party trustee sometimes needs to be replaced. It can be quite challenging for the beneficiary to replace the trustee.
If a special needs trustee is not up to the job or intentionally mishandles the trust, it can be difficult for the beneficiary to change the trustee, according to the Wills, Trusts & Estates Prof Blog in "Can the Beneficiary of a Special Needs Trust Change the Trustee?"
The advantage of a special needs trust is to allow a beneficiary to have access to income, while remaining eligible for government benefits.
However, in exchange for that benefit, the trusts are very restricted. They must be created in specific ways and the beneficiary's ability to control the assets in the trust is limited.
Technically, the beneficiary cannot distribute or manage the trust assets and a third-party trustee is needed.
A beneficiary of a special needs trust can petition a court to have the trustee removed and another appointed. However, this can be a difficult process and many people with special needs are not able to handle the complex legal issues of filing a petition with the court, let alone arguing for a trustee change.
This could potentially stick a beneficiary with a bad trustee and no recourse.
It is, therefore, important that special needs trusts be drafted with this problem in mind.
Reference: Wills, Trusts & Estates Prof Blog (Sep. 27, 2017) "Can the Beneficiary of a Special Needs Trust Change the Trustee?
“Many Americans confess that they are confused when faced with the myriad Medicare choices available to them. Others are simply not planning, nor saving enough to meet the challenge of health care costs in old age. In response, a whole new industry has sprung up nationwide.”
A recent iberkshires.com post, entitled “The Independent Investor: Elder Care in an Age of Confusion,” explains that it's called "life care planning." This is a corollary discipline for those attorneys who are practicing elder law. Elder law attorneys are, in effect, advocates for the elderly and their families. They handle a wide range of legal issues commonly experienced by seniors. Some of the issues deal with Medicare, Medicaid, Social Security, retirement, long-term care insurance and nursing home care costs. These lawyers can also draft wills and trusts, help families with special needs children, handle probate proceedings and issues, along with a host of other estate planning matters.
The concept of life care planning focuses on the level of care that’s required when someone becomes disabled or reaches a certain age. Life care planners identify the level of care the person needs, finds the appropriate care givers and then maps out the necessary private and public resources necessary to help pay for these expenses.
Realistically, when an individual reaches a certain age—or his or her health issues become more severe—someone has to monitor his or her well-being and anticipate the next level of care required. In many cases, those responsibilities are thrust upon a family member. But most of them are not equipped to make the proper, necessary medical and financial decisions. As a result, our loved ones don't get the care they need or, if they do, they pay an excessive amount from the family savings for it.
Life care planners are involved throughout the process. They help make those decisions for you and anticipate what will be needed in the future. These professionals will adjust your life care plan accordingly and find the best methods to pay for it.
Some elder law attorneys work with registered nurses and public benefits coordinators either “on staff” or on call. These attorneys also provide life care planning, such as sorting through benefits for those who are veterans and might qualify for aid.
Elder care can impact an entire family and future generations. If just one member of a family develops a debilitating illness, has a lengthy hospital stay, enters a nursing home or requires 24-hour nursing care, then life savings can evaporate in just a few years.
Speak with a qualified elder law attorney and address what could be one of the biggest risks to your retirement and well-being: a lack of planning in elder care and estate planning.
Reference: iberkshires.com (June 1, 2017) “The Independent Investor: Elder Care in an Age of Confusion”