Prior Planning for Catasrophes

None of us know what kind of unexpected surprises will occur in our lives. We’d like to believe they will all be happy events, like winning the big Power Ball jackpot. However, unpleasant things like illness or a flood or fire often occur. We never think it will happen to us, says The Dalles Chronicle’s article “Prepare now for emergencies.” Unfortunately, these things do happen, and when they do, being prepared can make all the difference between a stressful situation and a really awful situation that could have been made, well, less awful.

For starters, have you met with an estate planning attorney to create a comprehensive estate plan that includes a will or trust, a financial power of attorney and a health care power of attorney? The will/trust concerns distribution of your possessions and property, the power of attorney gives a trusted person the ability to take financial and legal actions on your behalf in the event that you become incapacitated, and the medical power of attorney allows someone to make health care decisions for you if you become incapacitated. There are also many other tools that an estate planning attorney can help you with, such as a Special Needs Trust, if your family includes a family member with special needs, or other trusts if they are needed.

Next, your emergency preparations should include having important documents assembled in a notebook, on a memory stick and/or a safe location. Imagine there was an emergency evacuation and you had to leave your home immediately. What documents would you need? Here’s a helpful checklist to look at:

  • Contact information for family members, doctors, attorneys, dentist, insurance broker, financial advisor.
  • Cash, so if ATMs are not working, you will have cash on hand.
  • Identification documents, including originals of your birth certificate, marriage license, divorce papers, passport, Social Security card, health insurance cards (or Medicare or Medicaid cards).
  • A video of your home and all of your possessions on your mobile phone. Consider emailing it to a family member or friend who lives in a different location.
  • Insurance policies for home, auto, disability, long-term care, etc. Include contact information for either 800-numbers or your local agent, if you need to file a claim.
  • A copy of recent financial statements for credit cards, banks, brokerage firms, retirement accounts, car loans, mortgage and similar types of accounts.
  • Copies of the last three years of tax returns. If you work with a CPA, they should have them on a secure portal, but a hard copy will be useful to have.
  • Legal documents for your estate plan, including the will, power of attorney and health care power of attorney, as described above.
  • Other legal documents, including car registration, car title and property deed to your home.

These documents should all be organized in a folder that is placed in your home where you and your spouse know where it is and can grab it on your way out the door.

One more item that should be noted in this digital age: if you use a laptop or tablet that contains websites that you use frequently for personal finance, investments, etc., be mindful of its location in the house, so you can grab it (along with a charger cable) quickly. If you have passwords for accounts—and most of us do—you should print them out and include them in your file folder for easy access. You can almost always re-set a password, but how much easier will rebuilding your life be if you have them on hand?

If you do ever face a catastrophic emergency, having these materials will save you hours of time and stress.

Reference: The Dalles Chronicle (July 16, 2019) “Prepare now for emergencies”

How Do I Estate Plan for a Child with Special Needs?

Estate planning is important for everyone, but it’s even more crucial for a family with a child who has special needs. It’s difficult to create an estate plan for children with special needs, because you don’t know what type of care he will need, or the type of government benefits for which she’ll be eligible, when she turns 18. People frequently become overwhelmed about special needs planning, because they don’t have a clear picture of what their children will need in the future.

A recent Forbes article, “Special Needs Kids Require Specialized Estate Planning,” says that if you have a child with special needs, it’s critical that you look at your planning options with your estate planning attorney and discuss your child’s health, capabilities and prognosis. You can then customize a plan that works for your child, with as much flexibility as possible.

Those with enough assets often would rather not to have their child get any government benefits and will set aside an amount to cover all the child’s living expenses in trust. Since the parents aren’t concerned with government benefits, the trust can be a discretionary trust that will distribute income and principal at the trustee’s discretion for the benefit of the child throughout the child’s life.

If there is a good chance the child will get government benefits, many parents create special needs trust to supplement (not replace) the government benefits that the child will receive. The trust must be drafted, so the child doesn’t become ineligible for the government benefits. These benefits provide for the child’s basic needs like a place to live, so the special needs trust will defray the cost of extras such as trips and entertainment.

If the parents can’t determine if their child will be eligible for government benefits, another option is for the parents to give their current trustees the authority to create a separate special needs trust at the time of the surviving parent’s death. Therefore, if the child is receiving benefits, the trustee can create the trust at that time, with the goal of preserving the child’s benefits.

All these trusts can be funded now. The parents can establish the trust and transfer cash or other assets to it, or the trust can be created now and left empty until a parent passes away. At that point, money can move into the trust from the parent’s estate, another trust or from a life insurance policy.

Some parents elect not to create a trust for their child and to disinherit him completely. The thinking is that the child can be supported solely by government benefits. Others go with a combination approach. They disinherit the special needs child and leave more assets to their other children, with the understanding that the other children will care for the special needs child. However, this isn’t a great idea. The siblings have no legal obligation to care for his or her sibling with special needs, just a moral one. If the child who inherited the bulk of the estate gets divorced, the assets are also susceptible to division upon divorce. Finally, the assets are liable to a creditor’s claim, if the child is sued.

Estate planning for a child with special needs can be hard, so get a flexible plan in place that will provide peace of mind.

Reference: Forbes (March 27, 2019) “Special Needs Kids Require Specialized Estate Planning”