Estate planning is simply having a financial plan to guide you in making your financial decisions. It involves setting a goal and adopting strategies that will help to achieve that goal.
No successful plan begins without an end in mind. Yet most estate planners never adequately address the question of what the clients’ goals are for themselves or their children’s day-to-day life after they are gone. For persons who are vulnerable and perhaps unable to communicate their own ideals, the need to capture this vision is even more emphatic.
No one is more unique than a person with a disability. Parents or other supporters will have built up an intimate understanding of the person. Things like: important milestones, sources of comfort, favourite possessions, pet peeves, special talents, and hidden fears. If no time is taken to record this knowledge an invaluable asset will die with that parent or supporter. PLAN has offered a great quote, “Every time someone dies, a library burns.”
One, get your clients to at least start. Even if all the answers are not readily obvious, an imperfect plan is much better than no plan. The simple act of “doing” often creates its own answers. Many clients may not have fully developed plans for all of these concepts. In some ways your legal “cart” may come before the vision “horse,” but at least your clients will be started with some protection in place.
Two, even once established a plan will be an evolving process. Government programs change, people change, and goals change. The plan should change with them. It is not a failure to make continuing adjustments; it is a sign of evolution.
The parents of a child with special needs, reduced mental capacity or whose physical challenges will prevent him or her from managing his or her own affairs, will likely want to ensure that their own estate planning will address the special needs of their child. There are two aspects to this.
The parents need to think about planning for what happens after they both pass away, but just as important, they need to plan for the unexpected during the lifetimes of the parents. Accordingly, estate planning for the parents’ assets can be divided into the following two phases.
- Planning that will operate during the parents’ lifetimes – This is referred to as living or inter vivos planning and can include the following:
- A Power of Attorney (or Financial Representation Agreement).
- A Health Care Representation Agreement.
- The establishment of a living (inter vivos) trust.
- Planning that will become effective only on the parent’s death – This is referred to as “testamentary” planning and includes the following:
- A Will.
- Beneficiary designations under a registered retirement savings plan (RRSP), registered retirement income fund (RRIF) or life insurance policy.
To assist the presentation of this information, it is helpful to undertand the key terms.
Power of Attorney (“POA”) – essentially means a document where legal authorization is given to another person. A POA is a document that authorizes another person, called an agent or “Attorney”, to act on behalf of the individual making the POA.
When a person agrees to be an Attorney, they agree to act as proxy in all business and legal matters for another individual. This means that using a POA, an individual has assigned this proxy to sign legal documents, contracts, sign checks and or even conduct real estate transactions.
An Enduring Power of Attorney, unlike a Power of Attorney, continues in effect even when the individual who made the POA loses his or her capacity.
Health Representative Agreement – A Representation Agreement is a legal document available to adults in British Columbia for personal planning. It allows you to authorize one or more personal supporters to be your representative to help you manage your affairs and, if necessary, to make decisions on your behalf in case of illness, injury, or disability.
A Representation Agreement is the only way you can appoint someone to assist you or to act on your behalf for health care and personal care matters. It can also cover routine financial affairs.
Inter Vivos Trust – A trust is a legal entity created by you and administered by a trustee (who holds legal title to the property of the trust) for the benefit of your beneficiaries. Inter vivos trusts are created during your lifetime. Trusts created after death, through the use of wills for example, are called testamentary trusts. Also known as a “living trust”, this trust has a duration that is commences at the trust’s creation and can remain until the distribution of assets to the beneficiary during or after the trustor’s lifetime.
Will – A legal document that communicates a person’s final wishes, as pertaining to possessions and dependents.
Beneficiary designation – A beneficiary is defined as someone who gains an advantage and/or profits from something. In the legal and financial worlds, a beneficiary typically refers to someone who is eligible to receive distributions from a trust, will or life insurance policy. Beneficiaries are either named specifically in these documents (designated beneficiaries) or they have met the stipulations that make them eligible for whatever distribution is specified.
Living (inter vivos) planning
Parents accept the fact that one day they:
Each parent should appoint at least one other person as that parent’s agent. If the parent is incapacitated as a result of an accident, the agent would be able to deal with the parent’s financial assets and legal affairs. There best way to do this in B.C. is to create a “Power of Attorney”. The individual you designate to hold your Power of Attorney is referred to as your “Attorney”. The term “power of attorney” is unfortunate. The attorney is your agent, not your lawyer. You can appoint anyone to act as your agent (you do not have to appoint a lawyer).
Each parent should have at least one Attorney. For parents who are in a stable relationship, the natural choice will be each other. However, what if both parents are incapacitated a result of being in the same car accident? If you and your Attorney frequently spend time together or frequently travel together, you need to appoint an alternate Attorney who can act in case the primary Attorney cannot.
You need to be able to trust your Attorney implicitly. The Attorney will have the power to deal with all your assets at and legal affairs, primarily a time when you are incapacitated. As a result, the Attorney would be able to abuse that power. Imagine that you are paralyzed and that you are completely dependent on one other person for your survival. Who would you choose as that other person? Once you have the answer, you have the range of people who you would trust enough to act as your Attorney.
A Power of Attorney is the most broadly recognized way to appoint someone to manage your financial and legal affairs. However, if a parent does not hold the mental capacity to sign a Power of Attorney, an individual can delegate the power to manage legal affairs and routine management of financial affairs through a Representation Agreement. However, appointing power over financial affairs through a Representative Agreement is more limited than a Power of Attorney. For example, a Representative Agreement can not give authority for dealing with real estate (or real property).
If you decide to sign a Power of Attorney, you can choose to sign either a “simple Power of Attorney” or an enduring Power of Attorney. A simple Power of Attorney ceases to be effective if you become incapacitated. Incapacitated means that an individual is legally incapable of managing his or her affairs. In order for your Attorney’s authority to survive your incapacity, the Power of Attorney must be an enduring Power of Attorney. In other words, it must specifically state that it survives incapacity and it must be signed in the presence of a lawyer or notary public.
It may be best to sign several originals of the Agency Document, as your Financial Agent may need to produce the original on various occasions.
Representation Agreement: Health and Personal Care Decisions
If you are unable to make your own non-emergency health care decisions (for example, you are in a coma), physicians will look to the following individuals for decisions on your non-emergency health care.
- First, your spouse.
- Secondly, any one of your children – The health care provider can take instructions from any child who happens to be available. No statutory order of priority applies as between the children.
- Any of your parents.
- Any of your siblings.
- Anyone else related by birth or adoption.
No order of priority applies to these other persons.
This is what the law provides if you have not appointed specific individuals to make those health care decisions for you. If you want some other order of priority, you can sign a Health Care Representation Agreement and appoint some other individual to make the health care decisions that you are unable to make. For example, it may be that one of your children would not be able to make a health care decision on your behalf and that you would prefer that the physicians consult only one specific child or a specific group of children.
The person you appoint needs to have a good sense of what your wish would be in the specific situation at hand. While you could prepare a set of written guidelines, it is more important that you personally discuss this difficult topic with your representative. If the representative has to make a difficult decision, it will be much easier if the representative has had the chance to discuss end-of-life matters with you.
If you decide to leave some written guidelines for the representative, remember to review and re-sign the guidelines annually (for example, each New Year’s Day). There is nothing worse than being presented with guidelines that are 10 years old and have been signed only once. By signing the guidelines annually, you are letting your representative know that you have reflected more than once on the guidelines and that your view has remained consistent down through the years.
Having said this, it is important to recognize that written guidelines are merely that — guidelines. They are not legally binding and are there only for the assistance of the representative. Your representative will make a decision based on what is in the guidelines, what you told the representative during that all-important conversation, and the representative’s own judgment in the context of the circumstances at hand.
There is a proposal to introduce a legally binding health care directive in which you can give binding instructions about medical procedures which can and cannot be used. If the law changes to give such documents legally binding status, think carefully before signing such a document. Remember that medical technology changes over time — what is impossible today might be possible a few years from now. Think about whether it is better to appoint a carefully-chosen individual who can make a decision based on the circumstances at hand and that individual’s knowledge of you, or whether it is better to have a written instruction that cannot be second-guessed in light of new medical technology.
For more information about a Health Care Representation Agreement, refer to www.rarc.ca/textual/info-gen/rep-agreement.html.
Trusts are useful tools in planning for persons with disabilities for a number of reasons:
- They are extremely flexible – this allows them to respond to the particular needs of the disabled beneficiary
- A trustee can be appointed to manage the funds. Where parents initially manage the trust funds as trustees, alternate trustees can be chosen to succeed them as time passes.
- Can provide structured payment or provide trustee with absolute discretion
- A trust can benefit both the person with disabilities and his or her family members.
- Can allow for payments out for the benefit of the person with disabilities as opposed to direct payment to him or her which facilitates payments to caregivers and care facilities as well as for many other things.
- Can be used to protect entitlement to disability benefits while giving the disabled beneficiary the benefits of the trust assets
Whether created under a Will or by way of an Inter Vivos trust, when planning a trust for a person with disabilities with the intention of preserving disability benefits, certain provisions are useful to consider. Choice among the available structures will depend on a number of factors including:
- Nature of the disability
- Needs of the disabled beneficiary and associated costs
- Personal circumstances of the beneficiary
- Life expectancy of the disabled beneficiary
- Existing assets of the disabled beneficiary
First, the choice of the trustee and alternate trustee allows for continuity over time in the management of the funds for the person with disabilities. The person with disabilities themselves can of course be the trustee if they are an adult, and their disability is not a mental capacity issue. However, in this case, they cannot be the sole trustee and the sole beneficiary of a trust and would need to have a Co-Trustee. However, if their mental capacity may deteriorate as a result of their disability, it may be possible to appoint them as an initial co-trustee with alternated appointed in the event of his or her loss of mental capacity. Where the person with disabilities is living with mental incapacity, then a trustee can be appointed with the possibility of an alternate trustee as the initial trustee ages.
Living (Inter Vivos) Trust
If the parents operate an incorporated private business, the parents may wish to reorganize the business so as to issue shares to a family trust. This will enable the corporation to pay dividends to the family trust, which can then use the dividend income for the benefit of an adult disabled child. The income can be distributed to the child as an allowance or can be used to cover expenses of the child (such as payment of rent). If properly structured, the income will be taxed at the child’s tax rate (which will often be lower than the tax rate payable by the parent). If a parent is the director of the private corporation, that parent will control whether and to what extent the trust receives dividends.
The family trust will be a living (inter vivos) trust, a trust established during an individual’s lifetime (as opposed to a testamentary trust that is established on the death of the individual). A testamentary trust pays income tax at graduated rates — the rate of tax increases as income increases. In contrast, a living trust pays the top rate of income tax on each dollar of income. However, the trust can deduct income that is paid to (or used for the benefit of ) a beneficiary, in which case the beneficiary pays the tax on that income. For this reason, a living trust is usually used strictly as a flow-through vehicle. The family corporation will pay dividends to the family trust only if the trust will be immediately “flowing” that income out to a beneficiary.
Testamentary (as of the Date of Death) Planning
The most obvious example of testamentary planning is a last will and testament. A will deals with the disposition of the assets that are owned as of the date of death, and does not become effective until death. This means that you can change your will as often as you want.
Other examples of testamentary planning are beneficiary designations in a life insurance policy, a registered retirement savings plan (RRSP), Tax Free Savings Accounts (TFSA) and a registered retirement income fund (RRIF) however, discussion of these financial tools is beyond the scope of this talk but important to involve your accountant and possibly your financial advisor as part of your Estate Planning team.
Your Will deals with assets that you own on the date of your death (except for assets that you hold as a joint tenant with someone else). In your Will, you get to specify how those assets are dealt with after your death. You can instruct that the assets be gifted to someone outright or held in trust for someone.
What is a Trust?
A trust is an arrangement under which a person (called a “Trustee”) holds specific property (called “Trust Property”) for the benefit of another (called the “Beneficiary”). There can be any number of Trustees and any number of Beneficiaries. Usually, the Beneficiaries are described by some common attribute (for example, “the children and other descendants of John Smith”).
A trust has to be established by someone (a “Settlor” or “Trustmaker”) who gifts property to the trust. If the Trustmaker gifts the property during the Trustmaker’s lifetime, the trust is known as a living trust (also called an inter vivos trust). If the Trustmaker’s gift occurs only on the death of the Trustmaker, the trust is known as a testamentary trust.
The trust document (usually called a Deed of Trust) will set out the specific rules that govern the trust. There is a great deal of flexibility as to the terms of the trust. If the Deed of Trust is silent on a specific point, the matter will be governed by general legal rules found in the Trustee Act. However, the Deed of Trust can make specific rules that apply only to that specific trust arrangement. For example, the trustee can be told to hold the property until the beneficiary reaches a specific age. Or the trustee can be told to hold the property until the trustee decides that the beneficiary is mature enough to receive the property.
Thought needs to be given to the exact scope of the trustee’s powers. Two competing objectives often come into play. On the one hand, the Trustmaker might want to be able to set out exactly what the trustees should and should not do. On the other hand, the Trustmaker might want to give the trustees the flexibility to respond to unexpected situations (especially if the trust might last a long time).
My preference is to give very broad discretionary powers to the trustee. This means selecting a wise trustee and relying on the good judgement of that trustee to use those powers only if and to the extent necessary. The mere fact that the trustee has a power to do something does not mean that the trustee is obligated to use that power.
Part II – Preparing for your death
Clients will sometimes struggle with finding an appropriate person to look after and support them or their relative. It is often helpful to break up the search into specific needs. At its most basic, the person may need someone to manage their finances and someone to support them as a guardian (whether legally or informally—as the relative is often an adult). If a professional trustee is used to manage the finances, then it may be easier to select a family member or friend who can instead focus solely on being a “guardian.”’
The professional trustee would not only lessen the burden of financial administration, they would also improve the arrangement with their objectivity. “Guardians” often make significant sacrifices to care for the person with a disability. The professional trustee is in a position to adequately judge the nature and amount of those sacrifices and provide some financial assistance. By contrast, a person who acts as both trustee and “guardian” may often find themselves questioning the conflict of interest they have between protecting the person’s trust fund and compensating for their own sacrifices.
Of course, the issue of legal guardianship is only relevant while the relative is a minor. A “guardian” cannot be appointed for an adult, even if they have an incapacity (other than by way of a formal committee appointment). However, this does not mean that we should ignore the importance of having someone continue to advocate for the person.
The first preference would be to have the person with a disability participate in selecting their advocate and granting legal authority to them through a Representation Agreement. Clients can help their relative create this agreement in advance of any need for it. However, if the relative does not have the mental capacity to create even a section 7 Representative Agreement, the only other method available to gain legal authority is the court process of being appointed as the person’s committee.
This process is cumbersome, expensive and does diminish most rights of the relative. Whichever method is to be used, the most important first step for clients is to establish who it is that will assume the responsibility.
Two forms of Joint Ownership
There are two separate types of joint ownership: one is joint tenancy and the other is tenancy-in-common. They have very different estate planning consequences. If you own property jointly with another person, you need to know which type of joint ownership is involved. This means looking at the document that set up the joint ownership.
Joint Tenancy – If you hold property with another person as a joint tenant, you have no control over what happens to that asset on your death. If you die and another joint owner survives you, your ownership interest passes automatically to the surviving joint tenant. In other words, the last joint owner — the one who outlives the others — automatically becomes the sole owner of the asset. Your Will has no relevance to the ultimate ownership of the asset, and your interest in the asset does not become part of your estate. Your portion of the asset automatically passes to the surviving joint tenant under a right of survivorship.
Spouses often hold assets as joint tenants so that the asset will pass automatically to the surviving spouse.
It is less common for a parent to hold an asset in joint tenancy with a child. This is sometimes done to avoid probate taxes in British Columbia. However, holding assets in joint tenancy with a child can lead to a host of problems that are far more significant than the payment of probate tax.
Tenancy-in-Common – If you hold property with another person as a tenant-in-common, your interest in the property is part of your estate on death. As such, it is governed by your will. You can select who gets your share of that asset on your death by putting appropriate language in your will.
Example: Assume that each of you and another person (call that other person X) are joint owners of a parcel of real estate. Each of you has a 50% interest. Assume that you die before X does. If you and X are joint tenants, X becomes the sole owner of the property on your death. However, If you and X are tenants-in-common, your 50% interest passes under your will. X then becomes a co-owner with your heirs.
You may wish to consider establishing a testamentary trust as part of your testamentary planning. You can establish a testamentary trust in most types of testamentary documents: your will, an RRSP/RRIF beneficiary designation, or a life insurance beneficiary designation.
You cannot establish a testamentary trust in respect of property that you hold as a joint tenant, because that property passes automatically to the surviving joint tenant.
If property is held in a trust, a person (the Trustee) controls and manages the property (the Trust Property) for the benefit of one or more persons (the Beneficiaries). This can have advantages if there is a concern that the Beneficiary might not be able to manage the property wisely.
There may also be income tax advantages but discussion of tax implications is beyond the scope of this discussion. It’s always important to discuss your estate planning with your accountant and/or a tax specialist.
How long can a Trust last?
You will sometimes hear that a trust can last no more than 21 years. This is a common misconception that arises because of an income tax rule. Under this income tax rule, a trust is deemed to dispose of its assets every 21 years for fair market value proceeds.
If trust assets have increased in value since the trust last acquired the assets, the trust may have to pay capital gains tax on that increased value as a result of the deemed disposition. However, the trust can simply pay that tax and carry on. If the trust has no capital gains (perhaps the trust is not investing in stocks), the deemed disposition of assets will not result in any need to pay tax. This is merely a tax rule that has to be dealt with every 21 years. Provided that the trustee has a plan to deal with any tax that arises as a result of the deemed disposition, there is no reason to terminate the trust prior to a deemed disposition anniversary.
In most provinces, the law requires that a trust terminate by the 21st anniversary of the death of the last beneficiary who was alive at the time that the trust was created.
This is completely different from the tax rule under which a trust is deemed to dispose of its assets every 21 years for capital gains tax purposes. Both rules use the number 21, but the similarity ends there.
In determining the maximum length of time that the trust exists, identify all the beneficiaries who were living at the time that the trust was created. Wait until the death of the last of that group of beneficiaries. The trust must terminate within 21 years of that last death. Given that healthy adult individuals can live into their 80’s and 90’s, a trust could last well over a hundred years in some circumstances.
The above rule applies to both living and testamentary trusts. The only difference is the date on which the trust starts. A living trust is a trust that is established during somebody’s lifetime, so the date to identify the group of beneficiaries is the date on which the first person contributes the first item of property to the trust. A testamentary trust is one that comes into existence on someone’s death (for example, the trust is created by the last will and testament of the deceased person). In this case, you need to identify the group of beneficiaries living at the date of that person’s death.
If a testamentary trust is established, the trustee can elect to have some income taxed as income of the trust and to have the rest of the income taxed as income of the child (regardless of the age of the child). In other words, the trustee can “mix and match” in order to achieve the best income tax result for the child. If the trust is properly structured for flexibility, that “mixing and matching” can change from year to year to consistently get the best overall tax result for the child.
For example, assume that the after-tax value of the estate is $500,000 and that this amount is invested at a 5% rate of return (annual income of $25,000).
- If the $25,000 in income were all taxed at the top rate, the total tax payable would be about $10,925 per year.
- Instead, assume that the $25,000 is earned by a testamentary trust. The applicable tax would then be all at the lowest of the marginal rates (i.e. 22% for a British Columbia resident). As a result, the total tax on the $25,000 of income would be about $5,500 (a saving of $5,425 per year). Over 20 years, this tax savings would be equal to $108,500.
The above example assumes that the trust distributes all its after-tax income. If the after-tax income were reinvested by the trust so as to earn even more income inside the trust, the tax savings would be correspondingly larger. The actual amount of the annual tax savings will depend on the rate of return for the investments and the rate that would have applied if the investments had been held directly by the child.
There is no need to hire a trust company or other professional to act as trustee. Any individual in whom you have confidence can act as a trustee. The trustee is your surrogate and is there to make the decisions that you would have made in the circumstances. As a result, the chief qualification of the trustee is sound judgment and an understanding of how you would handle different situations. The trustee can always hire professional assistance to deal with investments, the filing of tax returns, and other matters that require specific knowledge.
Given that the trust may exist for a considerable period of time, it is best to build as much flexibility as possible into the trust documents. Much can be left to the discretion of the trustee.
If a disabled child is eligible for provincial income assistance that depends on the child’s income level, having assets held in fully discretionary trust for the benefit of that child can keep the child’s income low and preserve access to the income-tested benefits. This form of fully discretionary trust is sometimes referred to as a “Henson Trust”.
If the parent’s assets include shares of a private corporation, and if the private corporation will continue to produce income beyond the parent’s death, the shares of the corporation could be structured so as to allow income to be paid to a testamentary trust for the disabled child (even during the lifetime of a surviving spouse).
Last Will and Testament
Your will governs the assets in your estate (not assets that are held as a joint tenant).
In many cases, one spouse leaves all assets to the surviving spouse. However, it might be worthwhile considering whether to leave assets to a testamentary spousal trust. Leaving assets to a testamentary spousal trust can have the following advantages.
- As is the case when assets are left directly to a surviving spouse, capital gains tax on the assets is deferred until the death of the surviving spouse.
- Assets in the trust do not belong to the surviving spouse. Accordingly, you can specify what happens to the assets on the death of the surviving spouse (the assets are not governed by the will of the surviving spouse). This can be important in the case of a blended family.
- The spousal trust can guard against hiccoughs in the estate plan. For example, the surviving spouse might remarry. However, marriage invalidates an existing will. If the surviving spouse neglects to redo a will after the remarriage, the surviving spouse could die intestate (without a valid will). If the surviving spouse dies without a valid will, assets that were intended for the children might go to the new spouse.
- Income earned by a testamentary spousal trust can be taxed as income of the spouse or as income of the trust. Since a testamentary trust is taxed as a separate individual, the trust pays tax at its own set of graduated rates. This can result in the payment of less tax than if the income were simply added to the income of the spouse. In a testamentary spousal trust, all the trust income must be payable to the surviving spouse for the remainder of the spouse’s lifetime. However, the trustee will be able to elect to have income taxed in the trust if that produces income tax savings. The trustee can have a discretionary power to use capital for the benefit of the surviving spouse or can be instructed to retain capital for the benefit of the children.
While the surviving spouse must be the sole beneficiary during the lifetime of the surviving spouse, other beneficiaries (e.g., children) can be named as beneficiaries effective on the death of the surviving spouse. At this point, the trust could be collapsed or kept in existence for the benefit of the children.
Developing an Estate Plan for Parents of Children with Disabilities: A 15-Step Approach (US – special needs alliance)
If you have a child with a disability, the need to plan for your future, as well as your child’s, is important and the time to plan is now! The reality is that something could happen at any moment to leave you or your child at risk. It could be your death, or a chronic or debilitating illness or catastrophic injury that impairs your ability to care for yourself and your child. These events cause emotional and often financial hardship, so why not create a plan now while you can be clear-headed and thorough? Planning early may seem expensive upfront but will save a lot of money in the long run. Planning gives everyone peace of mind: you, your friends, your family, and your child.
Planning ahead seems daunting – but if you take it step by step, it is really not so bad! First you organize, then you decide what you want, and then you sign the appropriate documents.
Below are some specific strategies for gathering and keeping the information you need to make a thorough plan. If you don’t gather this information, it can take weeks if not months for someone else to make sense of your organizational system (or lack of a system). Some of this information you need to make a plan and some of this information you will have only after your plan is adopted. The point is to get organized enough to make a plan – and then keep the information in one place for future reference. If you keep these key pieces of information handy, there is a greater chance your plan will be followed.
Step One-Creating the Receptacle: Get a file cabinet and folders, or an accordion-type folder that you can label. If you are more comfortable with computer folders and files, set this up on your personal computer. If you choose the digital route, keep the information secure but make sure to let someone know your usernames and passwords so that the information is accessible. There should be one file for your information and one file for your child’s.
Step Two-Important Personal Information: Create a document with all of your and your child’s personal information (name, nicknames, date and place of birth, phone numbers, Social Security number, Medicare number, addresses, etc.). You should also keep a separate folder with copies of birth certificates, military service records, deeds, insurance policies, stock certificates, spouse’s death certificate, marriage certificates, social security cards, automobile titles, divorce decrees, usernames, and passwords.
Step Three-Emergency Contacts: Create a document for emergency contacts for you and your child. Include contact information for your spouse, partner, significant other, children, siblings, and parents. If you have trusted service people who help with the home or lawn, these names and numbers should be included here. For your child you should have the name of the person you want to care for your child in case of an emergency.
Step Four-Medical Providers and History: Create a document for you and for your child with a list of medical providers and medical history. This list should include the names and numbers for primary care providers and specialists, medications, allergies, significant family history, insurance companies and policy numbers, your employer retiree coverage, health insurance, and any Medicaid or Medicare information. If you have prepaid your or your child’s funeral or burial, keep this information here as well. If your child is still in school, include information about his or her individual education plan and counselors at the school who work with your child.
Step Five-Financial Information: Create a chart for financial information. This includes the gross and net amount of each source of income (employment, social security, supplemental security income, etc.) and current value of each asset, the death benefit (if any), and all beneficiary designations associated with the asset. Include on the chart policy numbers and contact information, the name of any financial advisors you work with, a copy of your most recent tax statement, and a section on recurring bills, including whether the bill is paid on-line or by an automated payment. For your child, you should include all information concerning his or her representative payee accounts and special needs trust accounts. Copies of statements should be kept in the file cabinet or scanned in and stored on line.
Step Six-Legal Information and Documents: Collect any legal information you already have, such as the names and numbers for attorneys, health care agents, attorneys-in-fact, beneficiaries, trustees, and personal representatives. Make sure to also collect a copy of your will, health care directive, and power of attorney.
Step Seven-Accounts and Passwords: If you use on-line banking or bill-pay, or have any other accounts (email, Facebook, photo storage, etc.), collect a list of usernames, passwords, and answers to security questions to these accounts. Keep these in a secure place and make sure someone you trust knows where to find them! Make sure you have log-in and password information for internet accounts and sites your child may be using.
Step Eight-Letter of Intent: As a parent of a child with disabilities, you will also need to create a letter of intent. An upcoming issue of The Voice will discuss in more detail the importance of a letter of intent.
If these organizational tasks seem daunting, tackle them one at a time, and enlist a friend, family member, or financial advisor to help. You want this information to be protected yet accessible. Consider keeping the folder in a locked safe or file cabinet, a safety deposit box, or in a password-protected space on your computer. Then, let the important people in your life know how to access this information.
Make a Plan
Step Nine-Future Planning for Your Child: How do you want to provide for your child with disabilities if you die or are too ill to provide the care? You can’t make any plans if you don’t have any idea what you want. If it’s too difficult to think about your own death or loss of capacity, there are two ways to combat this: 1) consider what you don’t want (I don’t want my children to have to decide if I should be kept on life support if I am dying), and 2) consider what you would not want to have to do for someone else. For example, would it break your heart to have to figure out where your friend’s children would live if your friend died? By not planning for your own future, these are the kinds of decisions other people will have to make for you and your child if you are no longer able. Take some time to consider these issues, talk with friends and family, and pause and then come back to it if it becomes overwhelming. Remember that as a parent of a child with a disability, your planning will ensure that he or she will be cared for in the best way possible when you are no longer able to do so.
Step Ten-Meeting with a Special Needs Attorney: Meet with an attorney. Not only can an attorney draft the necessary documents for expressing how you want your property, finances, health care, and care of your children handled following your death and/or incapacity, but your attorney can also help you set up financial strategies, such as trusts, to ensure that your child with a disability can continue to maintain a quality life when you are gone. Make sure this attorney is familiar with Medicare, Medicaid, Social Security, and Supplemental Security Income (SSI) and the unique challenges that a disability brings to the estate planning process.
Develop your Plan
Step Eleven-Planning for Your Own Disability or Incapacity: Determine how your finances and health care will be managed if you are no longer able to manage them. How your finances will need to be handled, depends upon your situation. Here are the options:
Informal Arrangements for Finances: You can ask a trusted friend, or relative, or hire someone on a part-time or one-time basis to help manage your money and property. You could rely on automatic banking, direct deposit, or naming someone on your bank accounts to allow him or her to sign checks, pay bills, and transfer money between accounts. If you are the representative payee for your child’s Social Security benefits you cannot formally name someone to fill this role should something happen to you, but you can include your preference in your letter of intent (see Step Eight, above). Most important, you should think about potential representative payees for your child’s Social Security benefits and approach those individuals to see if they are willing to assume that role if needed.
Power of Attorney to Manage Finances. A power of attorney is a written document that appoints someone to handle financial matters in whatever way you spell out. For instance, the person you appoint could pay your bills, manage your bank accounts, and make sure that you are getting your income. Make sure you get a durable power of attorney, that is, one that continues to be effective after you lose capacity. The person you name as your attorney-in-fact or agent should be someone you trust, as you are giving this person an immense amount of power over you and your finances. If your child is disabled but has capacity (i.e., the child can manage his or her own affairs), then at 18 the child should also execute a power of attorney to appoint an agent to help with financial decisions if needed.
Arrangements for Health Care. There are countless informal and creative ways you can have health care and living needs managed. Often friends, family, neighbors, and the community will help provide you with the things you need. To ensure that you have your basic needs met, however, you may want to consider some of the more formal options available:
Advance Health Care Directives. A health care directive is a written document in which you name someone to make decisions about your care. By putting your health care wishes in writing, you give your family and loved ones a gift: they will know your health care preferences and to whom you choose to make decisions for you. Some states provide standard forms for powers of attorney for health care which you can use to nominate agents to manage your health care for you.
DNR/DNI/DNH. You may also choose to limit the scope of emergency medical care, through a “do not resuscitate/do not intubate/do not hospitalize” directive by you to your physician. Because of the limited scope of this directive, a health care directive should be completed as well.
Step Twelve-Your Child’s Conservatorship or Guardianship: Review your child’s conservatorship or guardianship. A conservatorship or guardianship is a court proceeding to designate a person to handle the financial or health care decisions for an incapacitated person. If your child has a guardianship or conservatorship, you should identify who should succeed you if you are no longer able to serve. Your state may have a procedure for you to designate your preference for who should replace you if needed. If you do not have a guardianship or conservatorship for your child but believe it may be needed after your death, you should discuss this with your attorney and get advice on the steps to take to be sure your child will be protected. Your planning should include identifying possible guardians or conservators if needed for your child and making sure those individuals understand the steps they will need to take to have the court appoint them for that role.
Step Thirteen-Decisions and Arrangements upon Death: Determine what arrangements should be made for you or your child at death.
Organ and Tissue Donation. To most people’s surprise, organ and tissue donation can be valuable no matter what the age of the donor! There are multiple ways you express your wishes to donate or not, which include: through your health care directive, driver’s license, written statement, or donor registry. Unless you expressly state that you do NOT want to donate organ or tissue upon your death, your health care agent or relatives (in order of preference) can make the decision to donate your organs at the time of your death. A parent may consent to the donation of a minor child’s organs.
Funeral Planning. In many states, you may name the person who you want to be in charge in a health care directive, or you can fill out an advance funeral directive. The funeral directive gives the person you name the power to make funeral arrangements, and can be helpful if you believe that people in your life may disagree about how to carry out your wishes regarding your funeral and the disposition of your body after death. You can prepay funeral expenses for both you and your child. If your adult child does not have the capacity to make his or her own funeral arrangements, you will need to see what steps your state laws provides for how a parent or guardian can make those arrangements in advance.
Step Fourteen-Your Own Estate Plan and Child’s Special Needs Trust: Have your attorney prepare a will or revocable trust that specifies what will happen to your property at your death. This document directs what portion of your estate should go to your child. Because Medicaid and the Supplemental Security Income (SSI) program impose special rules about how much money a person with disabilities can have to remain eligible, your estate plan may include a special needs trusts (SNT). A SNT can ensure a quality life for the child without affecting your child’s ability to continue to receive Medicaid and SSI, as long as the trust is drafted and administered properly. If you have specific goals or preferences for how your child should be cared for after your death, they can be specified in your will or living trust.
Review and Update your Plan
Step Fifteen-Updating Your Plan: Remember that planning for the future is a process, not a one-time task. As circumstances change for you and your child, you will need to revisit your plan. Sometimes this will mean updating your documents on your own, but usually you will need an attorney to guide you. You should update your information every year.
Consulting with an attorney who is familiar with special needs trusts and disability benefits will help ensure that you have done everything possible to provide for your child with disabilities.
The above 15 steps are not easy, but they will bring you peace of mind knowing that you have planned in advance for the time when you may no longer be able to manage your own or your child’s financial and health care matters.
“Reprinted with permission of the Special Needs Alliance –www.specialneedsalliance.org.”
ESTATE PLANNING LINKS FOR WILL MAKERS WITH DISABLED BENEFICIARY
If you have a child or family member with special needs or a significant disability, the need to plan for your future, as well as your loved one, is important and the time to plan is now. Here are some links to information and tools that will help you with this planning process:
- Developing an Estate Plan for Parents of Children with Disabilities: A 15-Step Approach – from the Special Needs Alliance
- Estate Planning for Families who have children with special needs in B.C. – from Autism Community Training
- Disability Assistance and Trusts – B.C. Government, Ministry of Social Development
Write a Letter of Intent.
In addition to legal planning, parents with children with special needs are also encouraged to consider preparing a letter of intent. If you were to suddenly die or become incapacitated, that alone would be traumatic for your child. The last thing he would need would be for his own medical needs, routines, and daily life to be thrown into upheaval as well. You can guard against that by writing a Letter of Intent, providing your child’s guardians with practical information to guide them in making decisions and interacting with your child.
A Letter of Intent is a letter that will act as a guideline for the caretakers of your child with special needs after your death. The letter includes a wide range of information including contact information for doctors, teachers, and other professionals. The letter also contains the likes and dislikes of your child as well as any other information that you believe is important for the caretakers to know about your child. This letter should be updated on an annual basis and kept with your other important documents.
Resources for Parents:
- Planned Lifetime Advocacy Network (“PLAN”) – www.plan.ca – is a membership-based non-profit organization, established by and for families committed to ensuring the safety, security and well-being of our relatives with disabilities. PLAN was established in 1989 by families who wanted an answer to the question “What will happen to our children with disabilities when we are gone?” In order to answer that question, PLAN works with its members to give their loved one with a disability a network of caring relationships, a sound financial plan, opportunities for contributions, supported decisions making options and a place to call home. Members Services include providing families with information, assistance, and help them plan for the future of their loved one as well as offering support, personal advocacy and connections to its families. Public Services include offering a number workshops, courses and retreats on topics related to disability. Among them are:
-Free information sessions on the RDSP (Registered Disability Savings Plan)
-Will, trust & estate planning workshops
-Online courses on how to build personal support networks
PLAN also put out a monthly ezine (e-newsletter) with stories, advice and articles relating to disability and they work with government and law makers to change policies and laws that effect people with disabilities.