I have spent my entire Career advising clients on planning designed to protect their assets, provide for themselves in the event of incapacity, and, ultimately, to create a financial legacy for their families. These plans extend from the very simplest of plans to very far reaching, intricate and complex plans, all derived from the values and goals of the family coupled with the financial assets they have to execute the plan. It is a fascinating, though often difficult process to move from the High Level “Idea” of the plan down to the critical details that incorporate the dynamics of the family and represent the true heart of the plan.
As this process unfolds, we learn more about the Children, Grandchildren and sometimes Great-Grandchildren, and what becomes immediately clear is how different each are, how different the relationships with each are, and how different the circumstances of each are. We discuss maturity, health issues, marriages, divorces, and, well the list can go on. It’s important because we want to plan for where our family is today, and where they will be in the future, when we are no longer here. It’s difficult to imagine, as a parent, when the day will come that our children will move on without us here. Difficult, yes, but if we don’t plan, then what we leave them could be put at risk by any number of things-divorce, creditor issues, predators, etc. We plan as much to give us peace of mind as to protect them in the future, just like we have done since the day they were born.
Do it Now. Sometimes ‘later’ becomes ‘never’.
It is true that noone wants to plan for their “end”, but given that we aren’t given a time and date for our “end”, it is truly important that we prepare those things that we can, to ensure that we spend the best days of our lives free of the worry of what if? When the time comes, if we’ve planned, the potentially devastating event will at least be more manageable for our families. A big part of this is planning for our children, and making sure that they are “Ok”. There are specific requirements when planning for children and adults with Special Needs, and expertise is needed from both the Attorney drafting these plans as well as for the Individuals who are designated to carry them out. There are rules and guidelines which govern these types of Trusts, to ensure that any governmental benefits available to the beneficiary are not disrupted. The following provides a general summary of the important considerations, though the specifics of the Beneficiary’s needs are critical in drafting the right plan.
SPECIAL NEEDS TRUST BASICS
- A special needs trust (SNT) is a legal arrangement whereby an individual or professional fiduciary (the Trustee) holds and distributes assets for the benefit of a disabled individual (the beneficiary) pursuant to the terms of the SNT. Many disabled individuals receive needs-based public benefits such as Medicaid or SupplementalSecurity Income. The purpose of a SNT is to hold assets that can be used to improve the beneficiary’s quality of life without jeopardizing eligibility for the public benefits.
- There are two types of SNTs – self-settled and third-party. Both require that the beneficiary qualify as “disabled” under the Social Security Administration’s definition of the term. The main difference in the two types of trusts lies in whose money is used to fund it.
- Choosing a trustee is one of the most important decisions the parties must make when creating a SNT. A SNT must name either an individual person or a professional fiduciary, such as Trust Point, Inc., to fill that role. Special needs trusts are governed by complex rules and laws. It is critical that the trustee be familiar with fiduciary duties, public benefits laws, investment standards, and trust accounting. A trustee’s improper administration of a SNT may jeopardize the beneficiary’s eligibility for needs-based benefits.
- The trustee generally has the discretion to make distributions for items that cannot be obtained through public benefits. Such items may include higher quality medical equipment, additional medical services, a more accommodating living arrangement, or better transportation. The trust may also pay for other expenses including legal fees, taxes, therapy, and nursing or in-home care.
(Julie Westbrook, 2018)
In the past few years, I have become more aware both personally and professionally of the increasing mental health challenges of younger generations. “While somewhat alarming, we’re not surprised by the recent statistics surfaced in the American Psychological Association’s annual Stress in America report, which found that 91 percent of Generation Z — those of high school and college age — said they had felt physical or emotional symptoms, such as depression or anxiety, associated with stress.” (Psychology Today)
Given these statistics, I would argue that it is AS important for planners today to recognize these challenges, which, while not categorized as “Special Needs” in the legal sense, do constitute Special Needs to be planned for. The following are some simple ways to address these needs in the event we are no longer here to support our child:
PLANNING FOR THE SPECIAL NEEDS OF OUR CHILD
- Leaving assets in trust versus outright to a child to provide for future medical needs
- Adding provisions within a trust to address mental health issues such as financial support to cover costs of treatment
- Adding a Trust Protector to provide guidance to a trustee by sharing more of the personal dynamics of the beneficiary
- Creating incentive provisions that give motivation to the beneficiary to achieve certain milestones
- Leaving a “Letter of Intent” to the Trustee in order to share your true intentions beyond the language of the trust
Thankfully, our planning conversations have evolved over time to focus on Life Planning versus merely Financial Planning. As a result, it is more important than ever that Women be a part of this conversation, to be sure that those things we hold most dear- our children, our family, our community are taken care of in a way that reflects how we would do it today. We must not delegate the most important decisions to others because we leave the financial decisions to our spouse, partner, advisor, etc. These are NOT financial decisions, these are decisions that affect the lives of our family.
Be like an elephant: Remember what matters, look out for your herd, and don’t be afraid to take up space.
Fortress Wealth Planning is registered with Hightower Securities, LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities, LLC; advisory services are offered through Hightower Advisors, LLC.
This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.
All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and Hightower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.
This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of Hightower Advisors, LLC, or any of its affiliates.