Updated: In this outtake from The Advanced Institute, a professional conference for estate planners, Jeff reviews the prevalent myths in special needs estate planning that need to be overcome when discussing planning with clients.
Common Knowledge Myths
Special Needs Planning
Sometimes something that is “common knowledge” is just a myth, and myths are prevalent in estate planning for special needs beneficiaries. For example,
- MYTH: You can’t leave an inheritance to a beneficiary with special needs.
- MYTH: You should leave a house, a car, and $2,000 directly to your beneficiary, but nothing more.
- MYTH: You need to have a separate special needs trust set up for your beneficiary.
MYTH: You need to have a separate special needs trust set up for your beneficiary.
When doing special needs planning, you don’t have to leave money directly to a special needs beneficiary so that the money goes into their pocket and they can spend it however they want. I often hear, “Well we just need to not leave them anything.”
There are actually many cases where there don’t a need to do a special needs trust. Sometimes there is, but in a lot of cases, they don’t.
One of the other things that I often end up working with my clients on is they are laser-focused on taking care of that beneficiary that has special needs to the exclusion of everything else. Well wait a minute we are doing planning and you have three kids. Oh, we’ll worry about them later. No, I have to get across that this is more holistic planning. It’s not just for that beneficiary.
Another myth is that an inheritance equals a spend-down in order to keep benefits. Some believe they have to spend the money and buy things that were within the rules, and they have to do it really quickly, and then the money is gone. That is not true. You do not have to do it that way.
You don’t have to leave money in a special fund with an outside organization. This can all be done within your own trust.
Some people think that leaving everything to another sibling is the perfect solution. We don’t want the benefits cut off so we’ll leave it all to the other sibling. But, what happens if that sibling dies? Is their widow or widower going to use that money in the same way your child would have? Are they going to honor that agreement even though it’s not in writing?
Please listen to the entire Video Here to get a better understanding of what to do and what not to do. And take a minute to listen to this video where Attorney Marsocci is speaking at The Advanced Institute with even more information.