Whether you have a child with special needs or you have a parent dealing with health-related disabilities, disability planning is something you should definitely consider. Regardless of where you child or parent may fall on the disability spectrum, you will want to ensure that your loved one has sufficient resources to be well-cared for in the future, without jeopardizing their eligibility for government benefits. Here are a few things to remember about disability planning.
Why Is Disability Planning a Necessity?
One of the primary issues that individuals with disabilities face is protecting their eligibility for valuable government benefits. Receiving gifts from parents or children can place those benefits in jeopardy if you are not careful. Many state and federal assistance programs, like Medi-Cal and Supplement Security Income (SSI), are needs-based programs. That means if you have too many assets, you may no longer qualify. However, by incorporating disability planning into a comprehensive estate plan, you can better protect your loved one’s financial security without risking the loss of benefits from important state and federal assistance programs.
How does disability planning help?
One of the most widely used disability planning tools is a “Special Needs” trust. This particular type of trust is a special irrevocable living trust that allows you to transfer assets into the trust to be used to “supplement” the care and maintenance your loved one receives from needs-based government programs. Essentially, assets that are placed in the trust can be used to provide for your loved one’s needs beyond what is provided by those government programs. Assets held in a special needs trust must only be used to provide specific types of care and maintenance to a person with a disability. These are sophisticated documents and should not be attempted without the guidance of an experienced and qualified estate planning attorney familiar with Special Needs Trusts.
Special issues faced by the elderly and aging
When it comes to the elderly and aging population, there are additional issues that must be faced head on. One common problem is the decline in the ability to make financial and healthcare decisions for themselves. As the problem worsens, your parent may be unable to manage their affairs altogether. In order to be prepared for this possibility, it is important to have a disability plan in place. Otherwise, a California court may be required to appoint a conservator to manage their affairs. That can be expensive.
Dealing with your loved-ones financial affairs
There are several ways to handle the needs of your parents if they become incapacitated in any way. One common method for assisting the elderly with managing their finances is a joint bank account. This is the simplest way to allow someone to access the funds in the account. However, it is prudent that you choose someone trustworthy because if they use the money for their own benefit, it could be very difficult getting that back.
Using a power of attorney as part of disability planning
A power of attorney is probably the most widely used disability tool. It is simply a written document authorizing someone else to act on your behalf. The primary consideration is making sure it is signed while the person with a disability is still competent. It is perfectly alright to have powers of attorney signed and executed far in advance of any anticipated incapacity. The power of attorney can be drafted so that it does not become effective until incapacity has been established.
Consider a “representative payee” arrangement
The Social Security Administration and other government agencies will allow the appointment of a so-called “representative payee” who is authorized to receive and handle government benefits. The representative payee is appointed when that agency determines it to be in the beneficiary’s best interests. The representative payee relationship, however, extends only to those benefits and not to any other finances.
How does a conservatorship work?
A conservatorship is a court-monitored arrangement where someone becomes ultimately responsible for supervising the personal, financial or medical matters for the benefit of the “conservatee.” The degree and nature of the responsibility depend on the needs of the conservatee. Initiating and terminating a conservatorship requires court action. It is also an very expensive and cumbersome process. So, before you decide whether a conservatorship is even needed, be sure to consider the various alternatives.
How does a conservatorship work?
A very good solution for handling a person’s incapacity is often a living trust -based estate plan. When properly drafted, funded and administered, it allows for the administration of one’s affairs not only at death but in the event of incapacity. Once again, these are sophisticated documents and should not be attempted without the guidance of an experienced and qualified estate planning attorney familiar.
If you have questions regarding disability planning or any other estate planning needs, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us as (916) 437-3500.
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