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Boston Elder Law Blog

What is the purpose of a special needs trust?

A person can have special needs as the result of a variety of situations. A disability could be genetic, occur at birth or be the result of a catastrophic accident. Regardless of how a Massachusetts resident became disabled, he or she may be entitled to assets through an inheritance, a settlement or some other means. Using a special needs trust to hold those assets can provide unique protections for the disabled person.

Family members' hearts are often in the right place when they leave an inheritance, but it could jeopardize any potential for the receipt of government benefits. The same risk also exists when a settlement or some other asset is received. Putting assets into a special needs trust means that they will not be considered as income when applying for benefits.

Are wills really that important for Massachusetts residents?

Many Massachusetts residents might be questioning whether or not they really need an estate plan. Wills may not seem to be that important since family members still have to file paperwork with the probate court. That may be true, but without wills, the time spent in probate often takes longer, costs more and often results in an individual's assets being distributed contrary to what the decedent would have preferred.

Any adult who owns any property or has children needs a will. This document allows a Massachusetts resident to choose who will receive his or her property after death. Parents are afforded the opportunity to choose who will act as the guardian of their children. Otherwise, family members could spend unnecessary time and money in court determining with whom the children will live. Moreover, it will be the last expression of love from parents to their children.

Wills do not dictate where every asset will end up

Massachusetts residents are urged to review their estate plans periodically to ensure that they continue to meet their goals. However, many people forget to review the beneficiary designations made on retirement accounts and life insurance policies when they are opened. Wills do not dictate where these assets will go upon death.

The beneficiary designation trumps whatever bequest is made in an individual's will. This means that an ex-spouse could receive the benefits from the account even if that was not the intention. Even if the ex-spouse is removed from the account and a new spouse is added, the proceeds may not be used as an individual intended.

Estate planning and long-term care insurance

The average cost of nursing home care across the nation is $80,000. Here in Massachusetts, it the average is $129,000. Therefore, residents may want to consider including long-term care in their estate planning.

As the average age of the country's population increases, so does the number of elderly people requiring nursing home care. At present, the Census Bureau estimates that approximately four percent of the population that is 65 and up reside in the 1.7 million beds available in nursing homes. That percentage skyrockets to 50 percent for people 95 years and older. Each year, the costs associated with that care increase. Medicaid will cover a certain portion of it, but doing some advanced financial planning could be in order.

Using a revocable trust to pass an estate to children

Many Massachusetts residents struggle with how to provide for their children after their deaths. One estate planning tool that many people use is the revocable trust. This versatile document allows parents the freedom to create a trust that works best for them and their children.

Distributions from the trust do not have to be made all at once. Parents can decide to give a specified portion of the trust to each child at a certain age. The trust can also provide a stipend for the person appointed as the children's guardian to help cover the extra expenses incurred when he or she agreed to care for the children.

Study says full guardianships recommended most often

Massachusetts parents who have special needs children typically reach a point where that child will reach the age of majority. At that point, parents can lose the right to make decisions on their behalf. Many of those parents look into the possibility of obtaining guardianships in order to continue caring for their children.

Guardianships can be either full or limited, depending on the needs of the individual. The issue of capacity of the disabled person takes center stage in any such proceeding. Not surprisingly, courts are often careful to appoint a guardian since the ability to make decisions for oneself are taken away when an individual is appointed. A full guardianship puts all of the decision-making authority in the hands of the guardian. By contrast, a limited guardianship leaves some of that authority with the person needing assistance.

Use a revocable or irrevocable trust for life insurance proceeds

Many Massachusetts families purchase life insurance policies to provide for their minor children if they pass away. However, a minor child cannot inherit the proceeds. Without a revocable or irrevocable trust to hold the proceeds upon death, family members will have to spend additional time and money to be appointed as the guardian of the minor child in order for the funds to be distributed.

Some would argue that creating a trust is unnecessary because under the Uniform Transfers to Minors Act (UTMA), an adult can be named custodian of the property until the minor child reaches the age of maturity, at which point all of the money is given to the child. The problem with relying on this act is that an 18 or 21 year old may not possess the self-discipline or maturity to manage the money in the way his or her parents would prefer. With a trust, Massachusetts parents can control when and how much of the proceeds are distributed to the child.

Family members benefit from a loved one's estate planning

Most Massachusetts residents are already aware of the benefits they receive by creating an estate plan. The benefits are not only for the person doing the estate planning but also for that person's family members. The more comprehensive the plan, the less work family members may have to do if a relative becomes incapacitated or passes away.

Serious accidents and illnesses do not discriminate by age or gender. If either of these events should happen, family members will need to be able to take care of a relative's assets and make health care decisions on his or her behalf. If the appropriate documents are not in place, it will be necessary to go to the courts to obtain permission to act, which many would consider a waste of time and resources.

What is the probate process?

Most Massachusetts residents have been told at one time or another that they should create an estate plan in order to avoid probate. Some residents, however, are not quite sure what the probate process entails and why it should be avoided. Two of the biggest reasons are that it can be time consuming and costly.

When an individual dies, his or her will is filed with the court. Under court supervision, any assets that a person owned at the time of death are gathered and ultimately distributed to heirs. The probate is filed in the state in which the person died. If property was owned in another state as well, an ancillary (secondary) probate is filed in that state in order to distribute it.

Wedding bells, wills and other estate planning documents

When the gifts are all unwrapped and the honeymoon is over, a Massachusetts newlywed couple's life begins. Thinking about how that life could end may not be at the top of the couple's list, but many would argue that it should be. It is important that they execute wills and other estate planning documents in order to provide each other with the peace of mind that if something happens, a plan is in place.

Without a will, the state of Massachusetts will determine who receives an individual's assets upon death. No one should assume that it will be the person or persons intended. Therefore, a will is often considered the core of every estate plan. After this document is created, the unique circumstances of each individual dictate what other documents may be needed in order to ensure that the assets are distributed in the manner desired. If the parties executed a prenuptial agreement, it should also be integrated into the estate plans of each spouse.

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