5.3.0 Wills, Trusts, and Estate Planning |
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Louisiana Statewide Transition Project and Louisiana: Healthy and Ready to Work Fact Sheet Series |
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08/24/00 |
Planning for how their estate will be distributed after they die is important for most people. When a family includes a member with a disability, planning for the disposition of property takes on even more importance. People whose family includes a person with a disability often ask: Do I need a will? How can I protect the financial needs of my child after I am gone? Will an inheritance jeopardize available government benefits? Do I have to disinherit my child to protect government benefits? Can I disinherit my child under Louisiana law? Should I leave my money to other family members so they can care for my child with a disability? What should I do about life insurance and retirement plan benefits when I die? All too often these questions arise at a time of crisis, when people are least likely to have the stamina or time to seek answers. Advanced planning for the care of family members with disabilities can provide peace of mind, both now and in the future.
Louisiana inheritance laws may jeopardize the public
benefits, such as Supplemental Security Income (SSI) and Medicaid, of the
family member with a disability. For
this reason, families of persons with disabilities need to understand these
laws and how they affect other rights.
Louisiana
Inheritance Law: When a person dies, the distribution of his/her estate generally will
depend on whether or not he/she has a will.
If a person does not have a will, Louisiana’s inheritance laws will
determine who gets what. On the other
hand, if a person has a will, he/she can control how his/her worldly goods will
get distributed. Before considering how
a person can control his/her estate through a will, certain terms must be
defined:
A person’s estate
consists of all his/her separate property and one half of his/her community
property, if he/she is married. Separate
property is property owned prior to the marriage or is property that has been
inherited or gifted to the person individually. Community property is property acquired during the marriage in
either spouse’s name, unless the community property regime has been
terminated. Louisiana residents must
give a portion of their estate to their forced heirs, if any.
Forced heirs include:
· any child, including an adopted child, of the decedent who is under the age of 24 when the decedent dies;
· any
child, including an adopted child, of the decedent who is permanently unable to
take care of himself or herself or of handling his or her affairs due to a
mental incapacity or physical infirmity;
· any
grandchild of the decedent, if the grandchild’s parent died before the decedent
and that parent would have been younger than 24 at the time of the decedent’s
death; and
· any
grandchild of the decedent, if the grandchild’s parent died before the decedent
and the grandchild is permanently unable to take care of himself or herself or
of handling his or her affairs due to a mental incapacity or physical
infirmity.
If a person dies
without a will in Louisiana, Louisiana law controls what happens to his/her
estate. If there are children, the
estate goes to the children equally, although the spouse retains a usufruct
over (use of) the property. Therefore,
if the estate is worth $100,000 and there are two children, each child inherits
$50,000. In such a situation, if one of
those children depends on SSI for his/her living expenses, he/she would lose
his/her government benefits because of the fact that anyone receiving SSI can
have only $2,000 in assets. In such a
situation, it would have been wise for the parent to make a will fashioned in
such a way that the child’s government benefits would not be jeopardized.
If a person has
made a will, he/she can control that part of his/her estate that does not
have to go to a forced heir. If there
is a forced heir, with a properly drafted will a parent can ensure that the
public benefits of the forced heir are protected. Through a will, the parent
can also: give the surviving spouse a
usufruct (use of his/her estate) for life; give the surviving spouse a usufruct
that will apply to separate property or which will apply over a child’s forced
portion; designate a guardian for minors; provide that any inheritance be
placed in a “special needs” trust to preserve SSI and/or Medicaid eligibility;
and provide for tax planning in large estates to reduce or defer estate taxes.
Providing
for the Financial Care of Family Members with Disabilities: Providing for the financial
care of a family member with a disability may be accomplished in a number of
way with a variety of results:
· Outright Gifts or Bequests. It is often tempting to give the family
member with a disability a sum of money he or she can use to supplement public
benefits or a salary. However, there
may be disadvantages to outright gifts of money: the individual may not have the capacity to manage money
properly; outright control over money may jeopardize qualification for
government assistance programs; assets may be subject to creditors’
claims. Before making outright gifts,
each of these potential disadvantages should be considered.
· Gifts or Bequests to Third Parties. Some parents may decide that, instead of
making an outright gift to the child with the disability, they will make the
gift to someone else, such as another child, with the instructions that the
gift be used to care for the sibling with a disability. While this may work in some cases, there may
be disadvantages to this approach, as well:
the sibling who receives the gift may be faced with an unwanted tax
burden as a result of the gift; if the assets bequeathed are insufficient to
care for the family member with the disability, the child who received the gift
may feel obligated to use his or her own resources to supplement the gift, even
when his or her own resources are not sufficient to do this; the obligated
child’s own financial, family, or business problems could interfere with his or
her ability to care for or aid the sibling;
the obligated child may simply be dishonest and not use the money in the
way it was intended.
· Trusts. A trust is a legal document created during a lifetime or at death
(by operation of a will) that designates a person (the trustee) to preserve,
manage, invest, and distribute funds for the sole benefit of one or more
beneficiaries. Placing the inheritance
of a family member with a disability in certain kinds of trusts may avoid
having the assets treated as a “countable resource” for purposes of
Supplemental Security Income (SSI) and other public benefits. If the family is relying on SSI (and
Medicaid) to help support their family member with a disability, they may want
to consider setting up a “special needs” trust. They will have to make sure that disbursements, required or
discretionary, from the trust do not exceed limits established by Medicaid.
One important decision a parent will
have to make regarding the establishment of a trust involves the selection of a
trustee. It is important to select
someone who is capable of managing the trust assets and who also is willing and
able to assume an active role in the provision of proper personal care for the
person with the disability. Ideally, a
brother, sister, trusted friend, or other relative would assume this role. Sometimes banks take on the role of trustee;
unfortunately, very few banks are willing to manage assets under $100,000 or to
become involved in the life of a person with a disability in a way that will
ensure his or her well-being.
The trust instrument can be as flexible
as the parent desires, although attention should be given to the requirements
or limitations imposed by public benefit programs. Parents can specify the powers and duties of the trustee, when
income distributions are to be made, and when and if principal distributions
are to be made.
· Other Assets,
Such as Life Insurance, Retirement Plans, and IRAs. Most of these assets pay benefits to the beneficiary designated
on forms supplied by the insurer or financial institution. If the person with a disability is
designated as a beneficiary, he or she may face the same problems of
disqualification for government benefits as he or she would face with any other
gift of money. Parents must be careful,
therefore, not to name the child with a disability, as opposed perhaps to a
“special needs trust,” as the beneficiary of one of these assets if the parent
does not want to jeopardize the child’s government benefits. The parent may also want to make sure that
other family members (such as grandparents) also refrain from naming the child
with the disability as the beneficiary of such assets.
Students/Young Adults:
Young adults who are approaching age 18 and who are capable of managing their own money should sit down with a trusted family member or friend and draw up an estate plan. It is never too early to discuss and plan for financial needs, expected and unexpected, and to make decisions about how finances will be managed.
Families:
Families should study all options related to estate
planning and determine which ones will best meet their families’ needs. Families should not put off making decisions
about these issues, because such decisions are best made in a thoughtful and
systematic way and NOT when the family is facing a crisis. If a family member decides he or she needs
a will and/or would like to set up a “special needs” trust for his or her child
with a disability, the family should consult with an attorney who specializes
in estate planning. This, like most
areas of law, is one in which good advice can give parents great peace of mind,
but where bad advice can result in the very situation the parents sought to
avoid.
Agencies:
Personnel who serve families
and young adults with disabilities should all become aware of the issues in
estate planning for persons with special needs so that they can discuss options
intelligently with clients and their family members. However, personnel who are not legally trained should refrain
from giving legal advice. Rather, they
should develop and maintain a list of attorneys who specialize in this area of
the law for purposes of referring family members of individuals with
disabilities to knowledgeable legal help.
IV. RESOURCES/CONTACTS
Advocacy Center
225 Baronne Street, Suite
2112, New Orleans, LA 70112-1724
Toll-Free 1-800-960-7705
Louisiana
Revised Statutes 9:1422 et seq.
Louisiana Civil Code, Book
III, Title I
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The development and dissemination of this document
were supported in part by funds from the U.S. Department of Education
(Cooperative Agreement #H158A6007, “The Louisiana Statewide Transition
Project: A Multi-Constituency Model”) and the U.S. Department of Health and
Human Services, Maternal and Child Health Program (Grant MCJ-22HRW6,
“Louisiana: Healthy and Ready to Work”). The opinions expressed herein are
solely those of the authors and do not necessarily reflect the policy or
position of the U.S. Department of Education or the U.S. Department of Health
and Human Services, and no official endorsement by either of these two
agencies should be inferred. The LSUMC does not discriminate on the basis of race, color,
national origin, sex, religion, age, or disability in employment or the
provision of services. This document may be duplicated and disseminated in its
original form without obtaining permission. Alternate forms of this document are available upon request at 1-888-942-8104 or TDD 1-504-942-5900. |