Settlement planning is a comprehensive strategy to manage funds from a legal settlement or award customized to meet the client’s objectives. It's designed to ensure long-term financial stability through wealth management and asset preservation. By forming customized strategies that cater to an individual's unique circumstances, settlement planning provides peace of mind and a sense of security for the future.
The crucial components of settlement planning include financial analysis, government benefit analysis, legal coordination, expert guidance, and ongoing support throughout the process. Each of these factors work together to best serve the individual and ensure effective wealth management and a high quality of life, while avoiding pitfalls such as loss of essential government benefits such as Supplemental Security Income (SSI) or Medicaid.
Settlement planning is paramount for plaintiffs as it provides a clear roadmap for managing their newfound financial resources and avoiding the loss of any government benefits. Through expert legal and financial guidance, plaintiffs are empowered to make informed decisions about their future. Settlement planning empowers plaintiffs by giving them the tools to navigate through complex legal and financial decisions effectively.
Settlement planning attorneys guide clients through the legal and financial aspects involved in managing a substantial sum of money while preserving eligibility for essential benefits such as SSI and Medicaid. They often collaborate with other professionals like financial advisors, tax advisors, trust companies, and case managers, to create a comprehensive plan aligned with the client's goals. Through their expertise, they protect clients from potential pitfalls associated with large settlements, such as tax consequences, mismanagement of funds, and loss of public benefits.
Not only does a settlement planning attorney protect injured parties, or claimants, from significant financial loss, but they also protect litigation firms from liability if they neglect to effectively advise their client as to the settlement’s impact on their tax liability and public benefit eligibility prior to their client receiving settlement proceeds.
An attorney with particular expertise in settlement planning can also provide advice on sophisticated planning tools such as a Qualified Settlement Fund or Plaintiff Recovery Trust in addition to designing a settlement plan for complex matters involving many parties as in mass torts and class actions.
Asset preservation is essential to safeguard funds from unnecessary depletion or loss. Settlement planning attorneys use various strategies like trusts, annuities, and insurance to protect assets for future needs. By preserving assets, we ensure that the funds are available when required the most.
For instance, setting up a trust can help shield a portion of the settlement funds from immediate access while ensuring they remain intact for specific future purposes. Annuities provide a steady income stream over time, offering protection against overspending or financial mismanagement. Insurance products such as life insurance or long-term care coverage can further secure the resources for unforeseen circumstances, especially if the injured party requires lifetime care.
By focusing on asset preservation, we maintain financial stability and security for the long term. This approach enables us to meet our future needs without worrying about resource depletion due to imprudent spending or market fluctuations.
Comprehensive planning involves a detailed analysis of the individual's circumstances — such as healthcare needs, education expenses, housing, transportation, caregiving, travel, and entertainment — to create a holistic plan. For example, if a client requires specific home modifications due to injury, we ensure that these needs are factored into planning. By addressing financial, legal, and personal goals comprehensively, settlement funds are utilized effectively to enhance overall quality of life.
Financial analysis is crucial in determining an individual's current and future financial needs. Working alongside Certified Financial Planners helps us assess income requirements, budget considerations, and future expenses to develop realistic plans that align with each client's unique circumstances.
This involves strategic approaches to ensure optimal utilization of funds. We partner with financial advisors to carefully consider investment diversification, tax-efficient strategies, and asset allocation techniques. For example, we employ tax-efficient strategies to minimize tax liabilities on income generated from the settlement. By strategically planning, we aim to maximize the potential growth and longevity of settlement funds.
Often, there is a misunderstanding in the difference between a settlement planner and an attorney who does settlement planning. A settlement planner – also referred to as a structured settlement broker – assists injured parties in selecting a particular financial product, usually a structured settlement annuity. A settlement planning attorney is a lawyer who has no financial interest in the outcome of the settlement plan but has specific expertise in the process and can lead a team of other experts.
Structured settlement brokers must be licensed to sell insurance to sell structured settlement annuity products. This type of annuity is an insurance product that must be purchased by a defendant for the benefit of a plaintiff. The annuity payment stream is customized, and there is a guaranteed interest rate, or internal rate of return, and the entire payment is not taxable income to the payee. Brokers often work exclusively with either plaintiffs or defendants, and will outline the financial and tax advantages to the plaintiff when the defendant purchases these products on their behalf. However, there are downsides to these products as well.
The settlement planner is typically not a practicing lawyer. If they only hold an insurance license, they have no fiduciary duty to the client, meaning they have no obligation to act in the client’s best interests. Proposals may not disclose the internal rate of return of the funds or the broker's commission. The annuity payments are static and cannot be modified even if the client’s circumstances change. Without the added protection of a trust, clients can be subjected to aggressive marketing to sell their annuity payments for pennies on the dollar.
By contrast, a settlement planning attorney has no financial interest in the outcome of the settlement plan. If they do, they have a duty to disclose this to the client and put their license to practice law at risk if they fail to do so. A highly experienced settlement planning attorney usually has a probate and estate planning background. Some attorneys specialize even further to focus on planning for persons with disabilities, working with catastrophically injured individuals, and more complex litigation. These attorneys help lead a team of experts to craft an individualized holistic plan that is as flexible as possible with administrative checks and balances. They also oversee integrating other experts, such as structured settlement brokers, certified financial planners, case managers, tax experts, benefits coordinators, life care planners, lien resolution experts, trustees, and other professionals, to bring together additional resources for an injured party’s life after settlement that helps the funds last as long as possible while preserving government benefit eligibility.
Settlement planning isn't a one-time task. It's an ongoing process requiring continuous monitoring and adjustments over time. Ongoing support from trust administrators ensures that our plan remains relevant as personal and legal circumstances change. Regular reviews allow us to make necessary modifications and maintain our long-term financial security.
Settlement planning is not just about money. It is about shaping your future. With proper planning, we can make informed choices that align with our long-term goals. Seeking the guidance of a settlement planning attorney ensures that funds are used wisely for our well-being and future, particularly for persons who have catastrophic injuries or those who also depend on government benefits to meet their basic needs.
Settlement planning provides support during these critical decision-making processes. We don't have to navigate this alone. Settlement planning teams are there to aid in these life-changing decisions. They offer expertise and advice on managing funds responsibly and making choices that will positively impact our lives in the long run.
Settlement planning involves creating a comprehensive legal and financial plan for individuals who have received or are expecting to receive a large sum of money, often from a litigation settlement. It aims to create a legal framework with checks and balances that maximizes the longevity of the funds, coordinates the funds with government benefits, and enhances the person’s quality of life.
Settlement planning helps individuals make informed decisions about their finances, protect their assets, and secure their future. It takes into account various factors such as taxation, government benefits, healthcare needs, and family dynamics to create a tailored plan.
Services may include legal analysis, financial analysis, investment management, tax planning, estate planning, special needs trust establishment, life care planning, public benefit preservation and coordination strategies, and guidance on structured settlements. These services are designed to address the unique financial challenges that come with receiving a substantial sum of money.
Hiring an experienced settlement planning attorney can significantly impact one's financial future by providing personalized guidance in managing and preserving the funds received from a legal settlement.
Settlement protection involves implementing measures such as trusts to safeguard the funds received from legal settlements against potential risks like unforeseen expenses or public benefits loss. This ensures that the individual continues to benefit from their award over time.
Looking for an estate planning attorney in Michigan? Navigating the complexities of estate planning and probate can be daunting but having the right legal guidance can make this process simple. Whether you need assistance with wills, trusts, or estate administration, a skilled estate planning attorney can provide invaluable expertise and support, ensuring your compliance with Michigan's estate laws and the protection of your assets.
Michigan estate planning attorneys specialize in managing wills, trusts, and probate matters, such as asset distribution and guardianship issues. These professionals help individuals navigate the nuances of estate planning, providing clients with peace of mind and security of their assets after they pass away. Moreover, these attorneys assist in minimizing tax liabilities for beneficiaries by employing various strategies within the confines of Michigan's tax laws.
Another aspect of an estate planning attorney's role is offering expert guidance on establishing durable powers of attorney and healthcare directives. These documents ensure that an individual's medical decisions are legally binding even if they become incapacitated. Without proper power of attorney documents in place, your loved one will be forced to open probate proceedings to manage your affairs and make decisions on your behalf.
Estate planning attorneys can also advise clients on selecting suitable guardians for minor children or individuals who cannot care for themselves. Their expertise helps individuals make informed decisions about appointing responsible guardians who can effectively manage the care and well-being of their loved ones.
When seeking a good estate planning attorney, it's crucial to consider their specialization and experience. An attorney who solely practices estate planning will possess the expertise and experience necessary to navigate even the most complex familial and financial situations. For example, they have specialized knowledge on how to handle blended families, large assets, and inheritance tax laws; knowledge that a general practitioner may not possess. These attorneys will have a strong understanding of Michigan state laws pertaining to estates, wills, trusts, and probate in order to best serve their clients and the distribution of their assets.
If you need guidance in planning for a loved one with disabilities, choosing an attorney with enhanced knowledge, resources, and experience is crucial. Planning in these situations calls upon more than just good document drafting, but knowledge of public benefits, and other resources to bring together a complete plan. The more specialized your family's needs, the higher degree of expertise is needed in a planner.
Assessing an attorney's communication style and approach to client relationships is important when selecting the right estate planning attorney. A good estate planning lawyer should be able to explain complex legal concepts in plain language while maintaining open lines of communication throughout the process.
Furthermore, pay attention to how comfortable you feel interacting with the attorney during initial consultations. A compassionate yet professional demeanor can make a significant difference in ensuring that your wishes are accurately reflected in your estate plan.
When seeking a Michigan estate planning attorney, start by asking for referrals from friends, family, or financial advisors. These individuals may have firsthand experience with reputable professionals who specialize in estate plans and can provide valuable insights.
In addition to personal referrals, take the time to research online reviews and testimonials about different estate planning attorneys. Look for consistent positive feedback that highlights their expertise in creating wills, establishing trusts, and offering sound legal advice.
Asking your network of contacts for recommendations can help you identify potential candidates. Moreover, exploring online resources such as review platforms and legal directories can offer further insight into the reputation and track record of various estate planning professionals.
When choosing an estate planning attorney, it's beneficial to assess their years of experience in handling estate planning cases. An attorney with many years of experience is likely to have encountered various complex scenarios, which has refined their skills and knowledge in the field.
Years of experience can be reflective of an estate planning attorney's expertise in drafting comprehensive estate plans. A skilled attorney will be well-versed in creating tailored plans that align with your specific needs and objectives.
For example, estate planning attorneys are knowledgeable on different types of trusts, such as special needs trusts, that take into consideration an individual’s specific circumstances. Their specialized knowledge enables them to provide valuable advice and guidance when structuring an effective plan for your life and assets.
When interviewing a Michigan estate attorney, it's crucial to inquire about their approach to updating and maintaining estate plans over time. A reliable attorney should have a proactive strategy for ensuring that your estate plan reflects any changes in your life circumstances or the law. For example, they might suggest regular reviews of your estate plan every few years or after major life events such as marriage, divorce, or the birth of children.
It's important to understand how the attorney will keep track of changes in laws that may affect your estate planning. You could ask if they provide newsletters, seminars, or other forms of communication to keep their clients informed about relevant legal developments.
Another essential question is related to the prospective attorney's strategies for minimizing potential family disputes over inheritances. A skilled Michigan estate attorney should be able to discuss various methods for reducing conflicts among beneficiaries. They might mention techniques such as clear and detailed communication with all parties involved, using trusts instead of wills for certain assets, or incorporating specific language in documents to clarify intentions.
You can also ask about their experience in resolving family disputes related to estates and how they have successfully navigated these delicate situations in the past.
When hiring a Michigan estate attorney, it's beneficial to inquire about upfront consultation fees. Some attorneys may offer free initial consultations. Generally, a free consultation is a time to determine whether you and the attorney are a good fit for your needs. Some firms charge for their time and legal advice may be given. This is an essential aspect to consider when choosing an attorney, as it allows you to gauge their expertise without incurring significant costs.
It's important to discuss the possibility of ongoing retainer costs with your prospective attorney. By understanding the nature of these costs, you can better prepare for any financial commitments that may arise during your working relationship.
Discussing the billing structure for various estate planning services offered by an estate planning attorney is something to consider. Some attorneys charge flat fees for specific services, while others bill hourly. Understanding this structure will provide valuable insights into how much you can expect to pay based on the legal support required.
It's also advisable to clarify any additional expenses related to document preparation or court representation. These details are crucial in managing your expectations and avoiding unforeseen financial burdens down the line.
When seeking a Michigan estate attorney, one may take into account their affiliations with reputable legal associations related to estate planning, if they speak or write for legal publications, or have taken on leadership roles in their professional community. Attorneys who are members of organizations such as the American Academy of Estate Planning Attorneys or the National Academy of Elder Law Attorneys (NAELA), or a specialty section of the State Bar often demonstrate a commitment to staying updated on industry best practices and legal developments.
Attorneys' involvement in these associations can provide clients with assurance that they are receiving representation from professionals who prioritize ongoing education, ethical standards, and comprehensive understanding of estate laws.
Researching an attorney's involvement in community organizations or educational seminars further demonstrates their dedication to staying informed about evolving legal landscapes. This active participation showcases a commitment to continuous learning and engagement within the field of estate planning law.
Before finalizing your decision on a Michigan estate planning attorney, review all the information you've gathered. Consider factors such as their professional affiliations, certifications, and experience. Look at client testimonials or reviews to gauge their reputation and success rate in handling estate planning cases.
When reviewing potential attorneys for your estate planning needs, take into account any specific requirements you may have. For instance, if you have a complex family situation or own substantial assets, look for an attorney who has dealt with similar cases successfully.
Consider reaching out to Michigan Law Center for your legal needs. We specialize in various aspects of estate planning and can provide personalized guidance based on your unique circumstances.
Michigan Law Center offers comprehensive services ranging from creating wills and trusts to special needs planning. Our team is well-versed in navigating intricate family dynamics and addressing clients' concerns about preserving assets for future generations.
A Michigan estate attorney assists individuals in drafting wills, establishing trusts, and planning for end-of-life matters. They also provide guidance on minimizing estate taxes and ensuring assets are distributed according to the client's wishes.
You can evaluate an estate attorney's experience by reviewing their track record with similar cases, assessing their years in practice, and checking for any specialized certifications or affiliations with reputable legal organizations.
When considering fee structures, it's essential to understand whether the attorney charges hourly rates or flat fees. Inquire about any additional costs such as court fees or administrative expenses to accurately gauge your financial commitment.
Seeking referrals from friends, family members, or other trusted professionals can provide valuable insights into an attorney's reputation and level of service. Personal recommendations often offer peace of mind during the selection process.
During interviews with potential attorneys it is crucial to inquire about their approach to complex estates, how they handle disputes among beneficiaries, their strategies for minimizing tax liabilities within estates, and their communication style with clients.
Estate planning is crucial for organizing the distribution of our assets and ensuring our financial affairs are in order. It involves making decisions about inheritance, managing property, and preparing for potential incapacity. Estate plans provide peace of mind by outlining clear instructions for the distribution of assets and can help avoid conflicts among family members after an individual's passing. Understanding the laws and titles involved is essential to ensure that our wishes are carried out as intended. By taking proactive steps in estate planning, we can secure our family's future and bring clarity to a potentially complex event.
Estate planning is a comprehensive approach to managing our assets during our lifetime and after death. It involves creating legal documents that outline how we want our assets to be distributed and who will make decisions on our behalf.
Estate planning allows us to have control over what happens to our assets, and ensures they are managed according to our wishes even if we become incapacitated or after we pass away.
Estate planning aims to protect our loved ones and ensure our peace of mind. By creating a clear plan for the distribution of assets, we can prevent disputes among family members and ensure that those we care about are provided for in the way we intend. For example, we can include provisions for minor children or individuals with special needs by offering them financial security and guardianship arrangements if necessary. An estate plan can also help protect children from misspending their inheritance, help protect it from being subject to creditors, or help protect it from future ex-spouses.
By clearly outlining the distribution of assets in advance through estate planning, we can minimize potential conflicts among family members after we are gone. This not only provides peace of mind during our lifetime but also ensures harmony among our heirs.
A significant benefit of estate planning is minimizing taxes and costs associated with asset transfer. Through proper estate planning, we can take advantage of strategies that help reduce tax liabilities on inherited assets. By doing so, more wealth can be passed on to our loved ones instead of being diminished by hefty tax bills.
Moreover, effective estate planning allows us to address potential expenses related to probate court proceedings and other legal formalities after death. This means there will be fewer financial burdens on those who inherit from us since unnecessary costs have been minimized through careful planning. For example, we can opt for a pre-paid funeral or make charitable donations to reduce our estate’s tax burden and costs.
Having a will is crucial. This legal document ensures that our assets are distributed according to our wishes after we pass away. For example, if I want my vintage record collection to go to my niece and my savings to be split equally between my siblings, I need a will in place.
A will also allows us to name an executor who will carry out these instructions and settle any outstanding debts or liabilities with our estate. By clearly outlining everything from beneficiaries to specific items or amounts, we can prevent potential disputes among family members and creditors. This expedites the probate process.
Often, people assume a will prevents probate. It does not. Instead, a will is a guide for the probate court on how you wish your assets to be distributed after you are gone. A trust is the primary tool for avoiding probate.
In addition to wills, trusts are another essential tool in effective estate planning. They offer various benefits such as managing and protecting assets during our lifetime and ensuring their smooth transfer upon death. By setting up trusts, we can control how and when our assets are distributed while potentially minimizing estate taxes.
For instance, if we have minor children or individuals with special needs who require ongoing financial support, establishing a trust can ensure that they receive the necessary care and resources even after we are gone. Moreover, trusts provide privacy since they do not go through probate court proceedings like wills do.
Apart from wills and trusts, powers of attorney play a vital role in estate planning. These legal documents enable someone we trust to make financial or healthcare decisions on our behalf if we become incapacitated due to illness or injury.
A durable power of attorney allows us to appoint an agent who will manage our financial affairs if we become incapacitated. It's comforting to know that someone we trust will handle bill payments, investments, or property transactions if we're unable to do so ourselves.
Likewise, a healthcare power of attorney is vital as it designates someone to make medical decisions on our behalf if we're unable to communicate our wishes due to illness or injury. This ensures that medical treatments align with what we would have wanted while providing peace of mind during challenging times.
Another critical aspect of estate planning involves naming beneficiaries for retirement accounts and life insurance policies. Doing so ensures that these assets bypass probate court and directly pass on to the designated individuals or entities upon our passing. This simple step can save time and money while ensuring that our loved ones receive the intended inheritance promptly.
A revocable living trust is a popular estate planning tool that allows for the management and distribution of assets while avoiding probate. This means that our loved ones can access these assets without having to go through the lengthy and costly probate process. With a revocable living trust, we can also make changes or revoke it if our circumstances change throughout our lifetime, providing flexibility.
For example, let's say we own multiple properties in different states. By placing these properties into a revocable living trust, we can streamline the transfer of ownership to our heirs without the need for separate probate proceedings in each state. This saves time and money for our beneficiaries.
Another benefit is privacy. Unlike wills, which become public record after going through probate, trusts provide confidentiality as they are not subject to public scrutiny.
Gifting strategies can help reduce the size of an estate for tax purposes. By gifting assets during our lifetime, we can lower the overall value of our estate that may be subject to estate taxes upon our passing. For instance, giving monetary gifts or transferring property to family members now reduces the taxable value of what remains in our estate later on.
However, it is crucial to consider potential gift tax implications when employing gifting strategies. The IRS has annual gift tax exclusion limits that should be considered when making substantial gifts.
Life insurance is another essential component of estate planning. It provides liquidity to cover estate taxes or provide for loved ones after death. In this way, life insurance ensures that there are funds available to settle any outstanding debts and expenses without requiring liquidation of other assets intended for inheritance by beneficiaries. Moreover, life insurance proceeds generally pass outside of probate directly to named beneficiaries promptly after death.
Trusts not only safeguard assets but also ensure that our loved ones with special needs are taken care of even after we are gone. For instance, establishing a special needs trust for a family member with disabilities can provide ongoing financial support for them without affecting their eligibility for government assistance. Our firm is uniquely qualified to assist families and individuals with these types of trusts.
Estate planning is not just for the wealthy. Many people mistakenly believe this, but it is crucial for individuals of all income levels. Organizing our affairs and ensuring that our wishes are carried out in the event of incapacity or death is not exclusive to any one economic status.
It is also important to understand that estate planning is an ongoing process, not something we do once and forget about. As life changes, so should our estate plan. This means regularly reviewing and updating documents to reflect any major life events such as marriage, divorce, births, deaths, or significant changes in financial status.
Procrastination often prevents us from getting started with estate planning. We might think we're too young or don't have enough assets to worry about it yet. However, starting early allows us to make decisions without feeling rushed or pressured by unexpected circumstances.
Partnering with an experienced estate planning attorney can also alleviate some of the stress associated with this process. They can guide us through the necessary steps and help tailor a plan specific to our needs while addressing any questions or concerns along the way.
Estate planning is crucial for securing our financial legacies and ensuring that our loved ones are taken care of according to our wishes. Proactive planning offers peace of mind and safeguards for our family's future.
With this in mind, we should take steps to initiate or review our estate plans. Seeking professional guidance and leveraging the insights shared can help us navigate the complexities of estate planning with confidence.
Estate planning involves making arrangements for the management and distribution of your assets after your death. It typically includes wills, trusts, powers of attorney, and other legal documents to ensure that your wishes are carried out.
Estate planning allows you to specify how you want your assets distributed and who should manage them if you become incapacitated. It can also minimize taxes and legal fees, provide for loved ones, and support charitable causes.
Key documents include a will, power of attorney for finances, advance healthcare directive (living will), and possibly a trust. These documents outline how you want decisions made on your behalf if you're unable to make them yourself.
Trusts allow you to transfer assets to beneficiaries without going through probate court while maintaining control over the assets until certain conditions are met. Powers of attorney designate someone to make financial or medical decisions on your behalf if necessary.
It's never too early to start estate planning. Life is unpredictable, so it's best to have a plan in place as soon as possible. Reviewing and updating your estate plan regularly ensures that it aligns with changes in laws or personal circumstances.
How Often Should I Review My Estate Plan?
You should review your estate plan at least every three years or whenever there is a change in your family (including the quality of relationships), a change in what you own, or a change in the law.
Note: You actually have the seven months surrounding your 65th birthday to enroll in Medicare. For example, if your birthday is April 15th, you can enroll starting January 1st until July 31st, but you should enroll before April 1st if you want Medicare coverage in April. Retirees technically have eight months to enroll after retirement.
* Most people do not pay a Part A Premium because they or a spouse earned 40 credits in Social Security-covered employment.
**If prescription drug premium is not part of the Medicare Advantage plan.
After deciding a special needs trust is appropriate, one of the most difficult choices parents make is the nomination of the trustee. Often a family member, especially a parent, will want to serve in that capacity. They have choices depending on the amount going into the trust, from trust department of banks to legal counsel, non-profit corporations, professional fiduciaries and family or friends.
If the trust is large enough, trust departments of banks will compete for the opportunity to act as trustee, especially in this economic market. There may be an opportunity to reduce the fiduciary fees they would charge for the opportunity to act as trustee. There are national banks and even life insurance companies that market their expertise to special needs planners. One advantage to a bank is that as a large institution it may provide better customer service in a predictable heavily regulated manner. In addition, rarely does a bank have to file a surety bond, which saves the trust from otherwise having to pay premiums. However, if there is a difference of opinion between the beneficiary and the bank trustee, it may be very difficult to move the trust to a different trustee. Courts often favor local banks over national corporations, especially if they do not have a physical presence in the state. Some other choices for professional fiduciaries are non-profit organizations which may specialize in special needs trust administration or may offer such services through grant programs, like ARC of Macomb in Michigan. Often, the drafting attorney will be willing to serve as trustee or has knowledge of other attorneys and organizations specializing in this type of trust administration. A judge or Guardian ad Litem may have special knowledge or experience with a particular professional fiduciary, and may appoint them despite other recommendations or family preference.
Most often family members or lay people, in general, are not the best option. The policies regarding allowable distributions change frequently and vary state to state. You can pay a family member for care services in some states, as you can in Michigan, but not others without penalty. In addition, there are tax considerations and investment issues to consider. Special needs trusts are complex to administer, and professional administration, even in light of the costs involved, is usually for the best. Potential family members as Trustees usually fall into two categories: the busy professional or the unsophisticated but willing. Neither are good choices. The busy professional is just that. Too busy. The willing but unsophisticated person is not a good choice as the potential for mistakes without professional guidance is too great a risk. In addition, if a bond is required the client may have trouble qualifying. Bond companies look at credit scores as a strong indicator of an individual’s fitness to serve as trustee, and if there are blemishes they will decline the application. If there is no court supervision or bond, there is no recourse for the disabled beneficiary if a family member improperly distributes funds or mismanages investments, causing a loss of benefits or loss of principal. The plaintiff or their next friend may not have full control over the nomination of trustee. The Guardian ad Litem, trial court judge or probate court judge may not agree with the nomination and may appoint a different party altogether. The wants and needs of the beneficiary should be given priority, balanced with accountability, professionalism, experience, costs and advocacy abilities of the potential trustee.
Individuals seek professional guidance to protect their assets, children, spouse, partner or other family members after they are gone. If their loved one is an individual with disabilities who depends on means-tested public benefits to meet his or her basic needs, it is essential to choose experienced counsel to help protect his or her present and future eligibility. Individuals who do not hire counsel, whether from a lack of sophistication or resources, may resort to disinheriting their child with disabilities and leave a disproportionate share to a sibling who , it is hoped, will “do the right thing.” While this is the least expensive approach, it provides no protection for their special needs child, and as such, it is the number one planning mistake many families make. The designated sibling may use the funds for themselves, especially if they encounter personal financial difficulties. The assets may become part of marital estate in the event of divorce, disability or death, and they are vulnerable to the creditors and claimants of the designated sibling.
In order to protect vulnerable family members, counsel will properly suggest a custom drafted third-party special needs trust as part of a complete estate plan. Most third party trusts are created either by execution of a custom drafted document, or through use of a third party joinder agreement with a pooled trust.
Even though other family members, especially those without children of their own, may wish to make a bequest to a family member with special needs, parents fail to inform them of the existence of the third party trust. As a practice point, counsel should inform the client how to instruct others to make current or future gifts to the trust and the tax consequences of doing so. However, not all families are of sufficient means to warrant a complex estate plan. They may have difficulty paying legal fees for the creation of this type of estate plan, or it may be too complex for them to manage. They may never fully fund the trust, or review the plan again. All of these factors contribute to the reluctance to create a comprehensive estate plan for themselves or periodically revise their existing plan. Counsel may consider the use of pooled trusts to assist families in exploring options which are cost effective and help meet the particular needs of their family member with disabilities. A pooled trust, as defined by 42 USC §1396(p)(d)(4)(C), is created and administered by a non-profit entity to manage and protect the assets of individuals.
Social security defines a third party trust as “a trust established by someone other than the beneficiary as grantor.” POMS SI 01120.200(B)(17). A grantor is further defined as the party who provides the res of the trust. POMS SI 01120.200(B)(2). To qualify as a valid third party special needs trust the beneficiary must have no ability to revoke the trust or direct distributions in any way (42 USC §1382b(3)(3)(A), 20 CFR §416.1201(A)(1); POMS SI 01120.200(d)(2)).
A pooled trust is defined in 42 U.S.C. §1396p(d)(4)(C), which states: “A trust containing the assets of an individual who is disabled (as defined in section 1614(a)(3) that meets the following conditions: (i) The trust is established and managed by a non-profit association. (ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts. (iii) Accounts in the trust are established solely for the benefit of individuals who are disabled with disabilities who are dependent upon governmental benefits to meet their basic needs, such as shelter, medical care, food, and income. An individual with excess assets, his or her parent, grandparent, guardian or court actions on his behalf, can place his or her excess funds into the trust and thus maintain their eligibility for governmental benefits.
In order to become a member of any pooled trust, the beneficiary, or other recognized authority as listed above, must execute a Joinder Agreement which dictates the terms under which the beneficiary will become a member of the pooled trust. While maintaining separate accounts for each individual member, assets are pooled together to maximize the return on investments, to spread the cost of administration and management among the members, and to reduce those costs through economies of scale. Pooled trust administrators apply these same principles to the administration of third party funds for individuals with disabilities. Pooled trusts are as varied in culture, fee schedule, asset management, and administrative style as other corporations, and there are many choices in pooled trusts, ranging in scope from local to national organizations.
(as defined in section 1614(a)(3)) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court. (iv) To the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this title.”
Parents with eligibility issues can also transfer assets to their child with special needs without penalty pursuant to 42 U.S.C. §1396p(c)(2)(B)(iii), and the funds must be placed in a self-settled trust, which mandates either a payback to the State or retention of the remaining assets. When reviewing the pooled trusts available in your state, counsel should consider several factors: (a) the reputation of the non-profit and trust within the locality of the client being served, (b) the cost of membership such as initial set up fees, perpetual and extraordinary fees (which varies greatly), (c) the longevity of the pooled trust, (d) reputation and experience of the counsel and administrators, (e) the ease and method of requesting distributions, (f) the performance of the investments and oversight of same, (g) availability of advocacy on behalf of the beneficiary, and (h) the retention policy of the trustee. Choice of pooled trusts, in many cases, depends on the recommendation of counsel creating the estate plan. Counsel should not make recommendations based on costs alone, but all of the listed factors, including compatibility of the emotional needs of the client with the trustee. Many pooled trusts have developed third party joinder agreements to allow parents or other family members to make current or future gifts to their loved one with disabilities. The method for determining the residual beneficiaries and the terms by which they receive funds vary greatly among pooled trusts. Typically, there is very little drafting required by counsel when using a third party joinder agreement, as the agreement itself is created and implemented by the non-profit trustee. The trustee may have a standard joinder agreement which contains provisions that are filled out by family or their counsel as to the disposition of any remaining assets. Other pooled trusts may implement a joinder agreement which references anaddendum to the joinder agreement outlining the grantor’s wishes. As with other ©2009 all rights reserved 5 third party special needs trusts, there is no payback required to any governmental entity. However, counsel should thoroughly investigate the non-profit trustee’s policy regarding the fees associated with disbursement of the residual funds to the designated beneficiaries, and whether the trust retains a percentage or charges a flatfee for wrapping up the affairs of the trust. Each family is unique in dynamic and presentment of issues. Use of the pooled trust joinder agreement provides flexibility when the parent is not sure whether governmental benefits will be necessary. Given the uncertainty as to their child’s potential for achievement and self-supporting independence, counsel can incorporate language which will allow the trustee of the parent’s trust agreement to convert the trust to a special needs trust.
Counsel should attach an executed joinder agreement to the Grantor’s revocable trust agreement. The grantor, or other family members, provides enough initial funding to qualify the trust as a seed trust, typically a nominal amount. In a more simple estate plan where a simple last will and testament are most appropriate, counsel can also reference the pooled trust as beneficiary on behalf of the heir or devisee with disabilities, and attach an executed joinder agreement. This Sample trigger provision provided by Susan Tomita: “It is the intention of the Grantors, should the Trustee determine that it is in the best interest of a beneficiary to qualify for needs based public benefits, that the Trustee have the discretion to amend the trust (or a trust share) to allow such qualification. Consequently, the Trustee shall have the power, if the Trustee deems it to be in a beneficiary’s best interest, to transfer the assets of the trust (or of any trust share) to a special needs trust or to convert the trust (or any trust share) into a special needs trust for the benefit of the beneficiary of the trust (or any trust share) that will allow such beneficiary to qualify for Supplemental Security Income, Medicaid, or other governmental assistance.” method allows the will to serve as a conduit for funding the special needs trust for the individual with special needs, thus creating a simple, cost effective estate plan that adequately protects the child with disabilities.
Using a pooled trust for third party funds may also offer a unique opportunity for the grantor and beneficiary to experience the pooled trust administration during the lifetime of the grantor. The parent, prospective caregivers, and beneficiary can form a relationship with the pooled trust administrators before the parents are gone. By forming a bond and creating an additional support for the beneficiary during the life of his or her parent, there is less stress after the parent(s) are deceased, and any issues with administration can be worked out ahead of time. It is also an opportunity for any nominated successor advocate to ease into their role by working with the beneficiary and the trustee.
Third party pooled trusts also help to eliminate choice of trustee issues as family members cannot serve as trustee. Rather, pooled trusts must be administered by the non-profits that created the fund, and typically do so with the assistance of counsel. Choosing the wrong trustee is another common mistake parents make when completing their estate plan. Parents naturally place administrative responsibilities for their own fiduciary needs on their adult children, who are typically the natural choice for trustee of the third party special needs trust. However, administration of these trusts is not like wrapping up the affairs of their deceased parent’s trust, which at some point will terminate. A special needs trust is particularly complex in that the ©2009 all rights reserved 7 trustee must provide management of the funds, be aware of changing public benefits policies, have a working knowledge of community and governmental resources, anticipate the impact of distributions on benefit eligibility, community, state and federal benefit programs, address tax issues, and be able to advocate for the beneficiary should benefits be eliminated. The siblings may or may not be familiar or comfortable with the role of advocate for their sibling with special needs. They or their spouse may become resentful of the time and attention required. The use of a pooled trust and its professional administrators and their counsel helps eliminate these issues, and possibly others as well. When the sibling is thrust into the role of trustee for life and has full discretion over the use of funds, it can place unnecessary stress and friction on that relationship. There is also a natural conflict of interest if the sibling is the remainder beneficiary and the trustee. Every dollar spent on theirsiblings needs is one dollar less that they will eventually receive. In addition, many pooled trusts provide the type of professional administration that would otherwise be unavailable for the size of assets under management.
Utilizing a pooled trust for third party special needs can be a flexible tool for counsel to meet the unique needs of their client by providing a cost effective estate plan which addresses the current or potential needs of a special needs beneficiary. Experience with pooled trusts will allow counsel to make confident recommendations to the client, eliminate some of the hazards associated with family trustees, and provide an additional planning choice to the traditional third party special needs trust.
Many probate practitioners advise and support litigation firms and obtain probate court approval of pre-suit settlements. There is a new CMS (Center for Medicare and Medicaid Services) reporting requirement, Section 111 of the Medicare, Medicaid & SCHIP Extension Act (MMSEA), 42 USCS §1395(y)(b)(8), effective July 1, 2009 that we need to be prepared to advise litigation firms and the court when serving as Guardian Ad Litem. Practitioners are already accustomed to resolving Medicare and Medicaid liens for past medical services before finalizing a settlement in liability and PIP cases. However, as of July 1, 2009 they must also consider future medical expenses for their client and evaluate whether their client’s situation triggers the new reporting requirement. This has generated wide discussions among settlement planning attorneys and structured settlement professionals whether this triggers the use of Medicare Set Aside accounts in these cases now and in the future. Unfortunately, CMS has enacted this new requirement without any regulations or procedures, and common review and enforecement practices may vary regionally. There are differing opinions among professionals as to the impact of the new reporting requirements and the effect on our clients.However, CMS officials reportedly comment that the purpose of the enactment is to ensure that any funds allocated for future medicals are to be spent before any claims are submitted to Medicare for payment, and CMS is to be notified when future medicals were a consideration in reaching the settlement. Collegues reportedly have encountered clients with large settlements who have already had Medicare refuse to pay providers.
An insurer has to report the settlement to CMS if the Plaintiff is: (1) a current Medicare beneficiary, or reasonably expected (i.e. a pending appeal) to qualify for Medicare within 30 months of settlement, and (2) the settlement is over Two Hundred Fifty Thousand Dollars ($250,000.00.) If the claimant meets the threshold for reporting, liability insurers, including self-insured entities, must complete a questionnaire/notice of the settlement and submit it electronically to CMS. Failure to do so is a $1,000/day penalty per claim. The Department of Justice is enforcing these requirements against all parties to the settlement, including Plaintiff counsel, and the Plaintiff themselves. All of us who advise counsel or the court with regard to settlement agreements need to be vigilant for our clients and the beneficiaries, and be aware of future developments as CMS forms policies to implement and enforce the new requirements.
Just when you think your work is done, the case resolved, they drag you back in. Something in the back of your mind tells you your client may have to do a trust or something to protect their benefits. Attorneys do not need to become special needs planners in addition to what they already do. Still, they do need to know some simple basics regarding the effect their client’s settlement may have on their eligibility for governmental benefits. Lawyers have been held liable for failing to recognize and advise their clients of the effect the settlement may have on their eligibility.
Whether a client is receiving funds directly as a result of their own cause of action, as a claimant under a wrongful death cause of action, an inheritance, or any other reason, the first question to be answered is whether the person receiving the funds receives means-tested benefits. Unfortunately, when a client is asked what type of benefits they receive, frequently the answer is “disability.” The client, or their representative, may not know the type of benefits the client receives or be able to find a determination letter. As a practice tip, the client or their legal representative can call 800-772-1213 and request a benefits statement.
Not all disability benefits are means-tested, so determination as to whether the client has benefits that need protection is the first step in the process. Early involvement with a Michigan special needs trust attorney will help the client become comfortable with the planning that will take place to preserve benefits, a process that may seem complex and overwhelming to them. Further, a consultation with the client regarding their benefits and the effect of receiving settlement proceeds or an inheritance limits the liability of the lawyer after the case is resolved, and sets client expectations regarding the handling of funds.
The most common are Supplemental Security Income (SSI), Section 8 housing, Medicaid, Veteran benefits, and Waiver services. Most of these are federal programs that are administered differently in each state. In addition, the client may also receive state and local benefits that are also means-tested.
Means-tested benefits typically have an income and asset limit to be met in order to become and remain eligible, and the Medicaid Assistance limit of $2,000 in countable assets is probably familiar to you. The best practice is to affiliate with local special needs trust lawyers near you at Michigan Law Center, PLLC, as they will be familiar with various types of benefits, quirks of the local DHS office and probate court where the client resides, and determine if a settlement or structured settlement payments will compromise the client’s continued eligibility.
After you have determined that your client in fact does receive a variety of governmental benefits and an outright distribution of proceeds or payments will affect their eligibility, when is a (d)(4)(A) special needs trust appropriate? When the following criteria have been met:
A (d)(4)(A) special needs trust refers to 42 USC 1396(p)(d)(4)(A), which codified one of the exceptions to the general premise that all trusts are countable assets with regard to means-tested governmental programs. By placing funds and/or structured settlement payments into a special needs trust, the assets are held for the sole benefit of the beneficiary while preserving their continued eligibility for assistance. Only a parent, grandparent, guardian, or court can create this type of trust. Notice that the beneficiary cannot create the trust themselves, and often court authority approving the creation of the trust is necessary. Some courts actively maintain supervision of the trust and require the filing of bonds and annual accounts which can be very costly.
Trusts with modest assets or those that are over-structured can be exhausted from these fees, and nothing angers a client more than having all of their funds go to pay lawyers and they receive little or no benefit. Counsel should consider the continued costs of administration when deciding whether this type of special needs trust is the most appropriate. Local counsel should also be consulted as to the common court practice where the trust will be administered. However, if a parent or other layperson is to act as a trustee, supervision may be advisable. With the current economy and job market, a loss of financial security within the family may make dipping into trust assets too great a temptation to resist.
One of the most difficult decisions can be the nomination of a Trustee. Often a family member, especially the parent of a minor, will want to serve in that capacity. However, most often family members or lay people, in general, are not the best option. The policies regarding allowable distributions change frequently and vary from state to state. You can pay a family member for care services in some states, as you can in Michigan, but not others without penalty. In addition, there are tax considerations and investment issues to consider. Special needs trusts are complex to administer, and professional administration, even in light of the costs involved, is usually for the best.
Potential family members as Trustees usually fall into two categories: the busy professional or the unsophisticated but willing. Neither are good choices. The busy professional is just that. Too busy. The willing but unsophisticated person is not a good choice as the potential for mistakes without professional guidance is too great a risk. In addition, if a bond is required the client may have trouble qualifying. Bond companies are looking at credit scores and if there are blemishes they will decline the application. Corporate or professional fiduciaries often do not have to file bonds so long as proof of liability coverage is offered to the court. If there is no court involvement and no bond, there is no recourse for the disabled beneficiary if a family member makes mistakes or improperly distributes funds.
The most common question a client has is, “What can the trust pay for?” Policies regarding distributions change frequently and differ from state to state. The Trust itself is designed to supplement governmental benefits, so needs that can be met through outside entities should be exhausted first before seeking payment from the Trust.
Generally, distributions from the trust must meet several criteria:
Often clients will inquire about the purchase of a home and transportation. Can they be purchased by the Trust? Yes. However, it must be done in light of the considerations outlined above and the purchase of any home should not be done without professional guidance, and prior court approval, if applicable. If the beneficiary is a minor, the trust does not relieve a parent of their obligation to provide for the basic needs of their minor child. Most importantly, do not overpromise the client. Setting reasonable expectations from the start is important for the client’s future relations with the Trustee and/or special needs trust attorney and ultimately benefits the disabled beneficiary.
More About What a Special Needs Trust Pays For
Knowing when a special needs trust may need to be implemented, what it is, and how it works in the best interests of your client are essential special needs trust basics all attorneys should know in order to avoid a client’s benefit disqualification and a potential claim for failing to provide this information. Working with an experienced special needs planning attorney early in the litigation, settlement, or probate process can assist counsel in meeting their due diligence obligation to their client, relieve a client’s anxiety about the process and their benefits, and set reasonable expectations after the matter is resolved. Michele P. Fuller is a partner with Fuller & Stubbs, PLLC based in Shelby Twp., Michigan. A busy mother of four, she is a council member for the Elder Law and Disability Rights section of the State Bar of Michigan, serves as Treasurer of the Macomb County Probate Bar Association, and is an active member of ASNP and NAEL.
Gabe Molitor is no ordinary trust-fund kid: He has epilepsy and Asperger's syndrome, a form of autism. His mother, Shelby Valentine, recently set up what's known as a special-needs trust, which will provide funding to pay for some of her 30-year-old son's expenses when Ms. Valentine and her husband are no longer able to care for him.
Miami lawyer Barry Nelson set up a special-needs trust for his son, Jesse, who has autism. Ms. Valentine and her husband, who live in Calistoga, Calif., are serving as the trustees while they are alive and have named their two daughters successor trustees. "It was such a relief," says Ms. Valentine. "It gives him a better quality of life after we are gone."
Parents of children with special needs often face years of expensive care for their children. Now a growing number of financial-services companies, lawyers, and financial planners --often calling themselves "special-needs planners" --are springing up to help parents provide for kids with disabilities, especially when parents are no longer alive to provide care. These professionals guide families through the intricate maze of federal and state programs for disabled individuals and help set up trusts, insurance policies, retirement plans, and estate planning documents.
Families with special needs have been in the spotlight recently with the vice-presidential candidacy of Alaska Gov. Sarah Palin, whose infant son has Down syndrome, a chromosomal disorder. The financial crisis has also added urgency to families' concerns about how their children's money will be managed when they're not around to oversee it.
More than 41 million Americans, or almost 15% of the population age 5 and older, have some type of disability, according to 2007 Census survey data. Some 6.2% of children ages 5 to 15, or 2.8 million kids, have disabilities, the Census Bureau found. And Individuals with disabilities are living longer than ever before. That means that many disabled children will outlive the parents who support them.
At least two professional groups --the Academy of Special Needs Planners and the Special Needs Alliance --provide referrals to lawyers familiar with special needs planning, and other resources. Financial-services firms such as MetLifeInc. and MassMutual Financial Group also have divisions devoted to special-needs planning.
Experts often recommend that families create a "special needs" or "supplemental needs" trust as the centerpiece of their plan. Such trusts will provide funds to pay for certain expenses that enhance a disabled person's quality of life --from residential
treatment programs to movie tickets or haircuts --while not cutting off access to government benefits, such as Medicaid or Supplemental Security Income (SSI), which is administered by the Social Security Administration.
A growing number of financial-services companies, lawyers, and financial planners are offering services for families with disabilities. Here are some resources:
Government payments can cover much of a disabled person's expenses. But in order to qualify for them, individuals cannot have assets in their own names that exceed $2,000 (not including a home, a vehicle, and basic personal items). In 1993, Congress permitted special-needs individuals under age 65 to have trusts funded with their own money --such as assets from a legal settlement or an inheritance --and still have access to government benefits. More common, however, are so-called third-party trusts, in which parents provide funding for trusts that benefit their children.
Funds transferred to a trust are not considered to be assets of the special-needs individual, as long as there's an independent trustee who controls distributions of the money and the disabled person can't just grab cash from the trust at will. A trust also insures that a qualified individual will be watching over the money, a particular concern for families since many disabled individuals cannot manage money on their own, says Michael Carris, a senior vice president at the trust division of Regions FinancialCorp. in Fort Lauderdale, Fla.
Barry Nelson, a Miami lawyer, set up a special-needs trust for his autistic son, Jesse, who is now 14 years old. The trust will be funded by life insurance when Mr. Nelson dies, and can be used to pay for expenses beyond what Medicaid or SSI would pay for, including "travel, companionship and cultural experiences" and "purchase of small visual and/or audio equipment for entertainment purposes," such as iPods or DVD players, according to the trust document. A special-needs trust "gives me --and it gives every parent --peace of mind," says Mr. Nelson, who says medical and educational expenses for his son run between $50,000 and $100,000 a year.
Rules governing special-needs trusts are complicated and vary by state and by the source of the funds. Relatives or parents themselves can be the trustees of the funds, although some experts recommend naming a financial-services company or a trusted adviser, such as a lawyer or accountant, to help manage the money and make distributions.
Ideally, the trustee should communicate regularly with the disabled person and be able to work closely with doctors, therapists and a maze of government agencies. Trustees also need to be very careful when making distributions. For instance, they should avoid paying money directly to the person with special needs, since that may disqualify him or her from government benefits, says Andrew Hook, a Virginia Beach, Va., lawyer and president of the Special Needs Alliance.
It's also crucial for grandparents and other relatives to retool their own estate plans to leave gifts or inheritances to the special-needs trust, rather than to the person with disabilities directly, in order to preserve eligibility for government programs. Beneficiary designations on retirement accounts and life insurance policies should also go to the trust.
"You've got to make sure that the relatives' estate plans are coordinated," says Sebastian V. Grassi Jr., a Troy, Mich., estate-planning lawyer. He created a special-needs trust for his 19-year-old daughter, who has cerebral palsy.
Setting up a special-needs trust can cost $4,000 or more, depending on the trust's complexity. Trust companies often charge about 1% of assets annually in management fees, depending on the size of the trust.
Another option is "pooled" trusts, in which funds from many special-needs families are bundled together and managed by nonprofit groups that focus on disability issues. Families typically use pooled trusts if they can't find appropriate individual or bank trustees, or if they have a small trust account that would benefit from bunching with other families.
There are some other key steps families with special needs should take. Parents should create power-of-attorney or guardianship documents for finances and health care, naming themselves as their child's agent or guardian when their child turns 18. Without this formality, parents of kids over 18 may not be able to have access to their child's medical records or make health-care or financial decisions, says Boston lawyer Harry S. Margolis, the co-founder of the Academy of Special Needs Planners.
It's also smart to create a "letter of guidance," a document spelling out everything another caregiver should know about their child's special needs, including medical diagnosis, treatment and medications, specific likes and dislikes, and food preferences or aversions. "You know things about your children that no one else on this earth knows," says Michael Gilfix, a Palo Alto, Calif., lawyer who does a lot of special-needs planning. "This includes little things, like what breakfast food makes them happy or what breakfast food makes them really angry.
"Ms. Valentine, a client of Mr. Gilfix, recently wrote a letter of guidance for her son, Gabe. The document describes how Gabe is a huge San Francisco Giants fan, so any caregiver should make sure he gets tickets to home games. He doesn't like ice cream or cake, but likes pizza. His epilepsy medication affects his teeth, so the letter recommends that he get his teeth cleaned regularly. "He actually loves the dentist," she says.
Write to Rachel Emma Silverman at rachel.silverman@wsj.com
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