Estate planning should be looked upon as a two-way street. Yes, you have to decide who gets what, but there is another element. A perfectly acceptable way to transfer assets to one person may cause problems for the next. You should take this into consideration when you are devising your plan.
Special Needs Planning
If you leave a direct inheritance to someone with a disability, you should consider government benefit eligibility. Many people in this position get their health insurance through Medicaid, and Supplemental Security Income (SSI).
These are need-based benefits, so an increase in financial status can cause a loss of eligibility. A direct inheritance received through the terms of a will would have a negative impact on their status. The funds would belong to the beneficiary, plain and simple, and there is a $2000 asset limit.
With this in mind, you can establish a special needs trust. The trustee that you designate would handle the assets, and the beneficiary would never own them. As a result, benefit eligibility would not be interrupted.
Meanwhile, the trustee would be able to use the assets to enhance the beneficiary’s quality of life in innumerable ways. After the death of the beneficiary, the successor that you name in the trust would receive any remainder that may be left in the trust.
Incentives to Provide Guidance
A life-changing inheritance is not always a good thing, because some people are not ready to handle it effectively. For example, a young person that has not completed (or started) their college education may not see a reason to continue.
Someone with or without a degree that has a lot to offer the world could decide to live a life of leisure. If you are not enthused by these prospects, you can make an incentive trust part of your estate plan.
As the name would indicate, you include incentives that must be met before distributions will be made. It could be a dollar-for-dollar match of money earned on a job, tuition and living expenses covered while the beneficiary is in good standing, or any other incentives you would like to include.
Spendthrift Protection Planning
You may have someone on your inheritance list that has come to you over the years on multiple occasions looking for financial assistance. When you are devising your estate plan, this may be a source of concern. What if they burn through their inheritance quickly, and there is nowhere to turn when they need help later on?
There is a relatively simple way to address a situation like this one. You can establish a revocable living trust, and on the surface, nothing will change. While you are living, you would be the trustee, and you would have total access to, and control of, the assets in the trust.
The loved one in question would be the beneficiary, and you would include a spendthrift provision. After your death, the trust will become irrevocable. The beneficiary will have no access to the principal, and this would apply to their creditors as well.
You could instruct the trustee to distribute a certain amount each month for a number of years, or you can use some other incremental payout arrangement. If you feel comfortable doing so, you can instruct the trustee to distribute larger lump sums when the beneficiary reaches certain age thresholds.
Schedule a Consultation Today!
We place an emphasis on two-way communication. When you work with us, we first learn about your family situation, your objectives, and your concerns and we will then provide appropriate planning recommendations.
At the conclusion of the process, you will emerge with the tailor-made plan that ideally suits your needs. If you are ready to get started, you can schedule a consultation at our Burbank estate planning office if you call us at 818-937-2335, and you can use our contact form to send a message.