Using Trusts to Provide for Minor Children and Disabled Adults
Most people worry about providing for their children after death. Wills and trusts offer unique vehicles through which people can provide financial security for future generations. However, for those with disabled adult children or minor children, there is the added concern about who will care for those children and how. Some of the big questions are: Who will take care of them? Will there be enough money to ensure they get the services and healthcare they need? Will the money I leave make them ineligible for public assistance? How will they go to school or get job training? These questions and more can create a lot of worry for people when trying to set up their estate plans. Fortunately, there are a few simple tricks your attorney can use to lessen these fears.
Disability – The Power of Special Needs Trusts (SNT)
Special needs trusts are established in limited circumstances, where a person is disabled and requires costly care. One common example is a person who becomes disabled as a result of personal injury. The money recovered from a personal injury lawsuit may often be put in a special needs trust so that the person maintains eligibility for public assistance (Medicaid), while retaining the majority of his or her funds to be used for supplemental purposes. If you have a disabled family member who has received, or may soon receive, money from a lawsuit, this may be a great tool for protecting the money, but it can usually be employed to help just about anyone with a disabled adult child.
Minors – The challenge of providing for minors through wills and trusts
One of the challenges of leaving money to your children is determining how it will be used. Most would agree that leaving $500,000 to an 18-year-old is probably a bad idea. Most 18-year-olds lack the responsibility and financial acumen to carefully invest and wisely spend that sort of money. For those who wish to provide for minors in their estate plan – whether biological or adopted children, cousins, nephews and nieces, and so forth – one concern is ensuring the money is actually used as intended. A will cannot do this. Upon death, a will simply directs the money to a recipient.
Wills are Insufficient
For example, if your will leaves $500,000 to your nephew who is currently 16, and you die before he turns 18, the money will likely sit in the estate until he turns 18, or the estate’s attorney will work with the executor to establish an account that will be maintained by his parent or guardian until he is 18. Since wills must usually be filed with the court upon your death, a probate court will determine how the money is disbursed to the minor, and depending on the state where the minor lives, there could be a host of varying outcomes that even your Florida elder law attorney cannot predict. While still a minor, there will be limitations and restrictions on any use of that money, but at 18, your young nephew will almost certainly get a windfall of tax-free money. You can probably guess how that will turn it out.
Third-Party Trusts Might be the Answer
On the other hand, though a will simply tells the courts where the money goes, a trust is designed to never see the inside of a courtroom. Trusts can be designed to work in tandem with a will to ensure that upon death, the money goes into a trust that is managed by a responsible and trusted adult. The money is to be used only for the minor’s benefit. In this scenario, you can set forth a timeline for the minor to receive money and you can decide how much and when and upon which conditions the minor may receive payments. You can even set these up to protect the money from potential creditors.
As you can see, there are a number of ways to provide for minors and disabled adults in your estate plan. If you think this may apply to your situation, you should contact an experienced elder law attorney who understands the many state and federal laws that apply to these technical planning devices. The Millhorn Elder Law Planning Group has three offices conveniently located throughout The Villages. Call for a consultation today.