Question: As the parent of a child with special needs, I know I need to have a Will, and probably a special needs trust, but do I really need to have a durable power of attorney for financial affairs?
Yes. Your Will is only effective if you die, whereas a power of attorney is effective while you are alive. If you became incapacitated due to an accident, disease or other cause, no one can handle your financial affairs. At that point, someone would have to hire an attorney and go to court to seek guardianship of your assets, so they have the authority to act for you and continue to pay your and your family’s bills.
However, appointing an agent in a financial power of attorney avoids this costly court guardianship proceeding. Your agent can continue to manage your assets and use your funds to meet the financial needs of you and your family, including your children. In addition to your agent, we suggest you appoint two back-up agents, in case your first agent cannot act. This is especially important if your agent is your spouse, as you could both be incompetent as a result of the same accident. Often clients chose relatives, close friends or colleagues as agents, and it is important that you really trust your agents. Agents should have good judgment and have the financial savvy necessary to manage your affairs. Therefore, the more complex your finances, the more financially sophisticated your agents should be.
Financial powers of attorney can be effective immediately, or they can be effective upon your incapacity (usually as determined by two doctors who confirm you are unable to handle your financial affairs). The latter type is referred to as a “springing” power of attorney, as it “springs” into effect upon your incapacity.
Finally, since you have a child with special needs, if you choose to include provisions in your power of attorney that authorize your agent to make gifts or distributions to your child with special needs, you should discuss with your attorney how those powers should be restricted so that any gift or distribution that your agent makes to such child will not jeopardize his or her ability to apply for or continue to receive his or her government benefits.
Click here to learn about Tanya Harvey’s March and April presentations on “Estate Planning for the Special Needs Family” that are open to the public.
Should my relatives give money directly to my child with special needs?
No. Family members and friends should be cautioned against gifting money or property, or leaving money or property in their wills directly to your child except in ways that do not result in a loss of eligibility for public benefits or liability for the cost of your child’s care. If you desire, a special needs trust can be established during your lifetime to accept such gifts. It would be prudent to have grandparents’ wills reviewed by an attorney familiar with special needs trusts to avoid bequests that will have unintended and unwanted consequences. Further, neither you nor your relatives should establish any Uniform Transfer to Minors Act (UTMA) accounts for your child, as these accounts may disqualify your child for Supplemental Security Income (SSI) and Medicaid.
I am the parent of a child with special needs. Should I give money to a relative to care for my child with special needs after my death instead of giving the money directly to my child?
Your expressed desires to your relative about the money create only a moral obligation on your relative and are not legally binding obligations that can be enforced. Further, if the relative dies, divorces or has financial problems, your child’s lifestyle could be negatively affected. Specifically, in a divorce, your child’s monies may be considered part of the marital property and part or all may be awarded to your relative’s spouse. If the relative dies, the money passes into the relative’s estate and goes to his or her beneficiaries or heirs, which might not be your child. Also, if your relative has to declare bankruptcy, creditors could put a lien on your child’s monies.
If you die without a will and have assets in your own name, your assets will pass by your state’s law of “intestate succession,” which sets forth who in your family will receive your estate and in what order. This distribution may be contrary to your wishes and may result in your child being denied eligibility for public benefits (generally, an individual may not receive SSI or Medicaid if they have more than $2,000 in assets). For example, if you die without a will in some jurisdictions, the law requires your assets be divided between your spouse and your child, even though you may want your assets to go to your child only if your spouse is not alive. In addition, a court would have to appoint a legal guardian that is accountable to the court to invest and manage your minor child’s inheritance, until your child reaches age 18. At that time your child would have full control of the assets, which may not be your desire.
If your child receives an inheritance that causes your child to exceed the $2,000 allowable asset limit, he (more…)