Part 3: Estate Planning in the Midst of COVID-19
ShuffieldLowman attorney Robert Baldwin talks about estate planning for second marriages, homestead in Florida, intestate share, elective share, and more.
Webinar Part 2: Estate Planning in the Midst of COVID-19
ShuffieldLowman estate planning attorney, Robert Baldwin, discusses guardianship, what a Power of Attorney is, and how these can be used in the estate planning process.
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Myths Surrounding Medicaid
The Importance of Having an Estate Plan | COVID-19
The COVID-19 pandemic has certainly created a great deal of stress, anxiety, fear, and questions. We live in a time where our daily normal activities have been abruptly and completely disrupted. As an estate planning attorney, I have been asked many questions about the current importance of having one’s financial and health care legal affairs in order.
Most Americans do not have an estate plan and, generally speaking, prefer to postpone or otherwise avoid plans for sickness, disability, and death. However, not having the proper documents in place can cause numerous critical issues for individuals and/or their families at an already difficult time.
There is no “one size fits all” estate plan, even in a time of crisis. That said, a few documents that most everyone should have and keep up-to-date include the following:
- Living Will. In the event of incapacity, a Living Will allows one to direct whether or not to withhold or withdraw certain life prolonging procedures for a terminal condition or a persistent vegetative state.
- Health Care Surrogate Designation. A Florida resident may designate authority to a person to make all health care decisions on their behalf in the event of their incapacity.
- Pre Need Guardian Designation. A Florida resident may designate who will serve as the guardian of their person and property if they are ever determined to be incapacitated.
- Durable Power of Attorney. A Florida resident may delegate authority to another to act on their behalf, whether or not they are incapacitated.
Those Florida residents who own assets should also have a Last Will and Testament, and perhaps a Revocable Living Trust. A resident who dies without a Will and/or Trust will have Florida law dictate how their assets are distributed. One benefit of utilizing a Trust based plan over a Will based plan is the avoidance of a court-supervised probate proceeding. There are many reasons why people plan to avoid probate, including but not limited to, privacy, cost, and efficiency. A socially devastating pandemic is just one additional reason why many Florida residents wish to avoid probate, as most court proceedings stop. Residents who require a probate process in a time of crisis must simply be patient and wait. For family members who require immediate access to financial accounts or wish to sell titled assets, patience is easier said than done. Effective Trust planning can avoid or substantially mitigate such problems.
Florida residents who have already taken action to get their affairs in order are reminded to review their documents and ensure that they are kept current, particularly in light of a divorce, new marriage, birth of a child, and/or other relevant event.
While many of us are quarantined in our homes with a bit more time on our hands, it is an ideal opportunity to put a plan in place or to review a current, possibly outdated plan. Life and death do not get put on hold and neither should planning for them. A well-equipped estate planning law firm is able to handle most aspects of preparing a client’s estate plans virtually and remotely. I am fortunate to practice in a time where I have the ability to speak and consult with clients on the telephone or by using popular video conferencing platforms like Skype, Zoom, or Face Time. Clients are able to quickly and easily review document drafts via email. If you have questions about your estate plan, please do not hesitate to contact us here.
How to Decant to a Special Needs Trust
In 2018, Florida revised the ability to more easily modify existing trusts. Basically, now there are three separate ways that a trustee may engage in a decanting, a general term used to describe the trustee of an existing trust creating a new, second trust, and moving all assets of the old trust into the new trust.
1. A trustee may decant if they are given “absolute power” over distributions in the trust instrument. This method of decanting provides the most flexibility for all parties.
2. A trustee without “absolute power,” such as a distribution power limited by the ubiquitous health, education, maintenance and support, or “HEMs,” standard may decant. This method must comply with a more rigid standard.
3. A trustee may decant from any trust that does not qualify as a “supplemental needs trust” to a trust that does qualify as such. There are important limitations for this type of decanting as well.
You can read more about the ways a trustee may decant a trust in our other article: Decanting Trusts In Florida.
New statutes in Florida for special needs trusts
The new statute provides that a trustee who has the power “to invade the principal of the first trust to make current distributions to or for the benefit of a beneficiary with a disability may instead exercise such power by appointing all or part of the principal of the first trust in favor of a trustee of a second trust that is a supplemental needs trust.” A “beneficiary with a disability” is defined as “a beneficiary of the first trust who the authorized trustee believes may qualify for government benefits based on disability, regardless of whether the beneficiary currently receives those benefits or has been adjudicated incapacitated.” A “supplemental needs trust” is defined as “a trust that the authorized trustee believes would not be considered a resource for purposes of determining whether the beneficiary who has a disability is eligible for government benefits.” That provides a great deal of flexibility in the trustee being able to create a second trust that qualifies as a supplemental needs trust, however, there are requirements specific to this type of decanting.
There are many situations where decanting to create a supplemental needs trust will be desirable. For example, what if mom and dad create a trust that is irrevocable after their death and this trust benefits their three children? The trust lasts for the life of the beneficiaries and allows the trustee to distribute from income or principal to the beneficiaries for their health, education, maintenance, and support.
If after the death of their parents, one of the children is involved in an accident or suffers a brain injury with permanent damage, then the terms of the trust will no longer be the best structure. Through decanting, an authorized trustee could create a second trust that is a supplemental needs trust for the benefit of the child with the disability and move one-third of the first trust’s assets to it through decanting. Another second trust could be created for only the other two children who have no disability (with all other terms being the same as the first trust) and two-thirds of the first trust’s assets moved to it through decanting. After the decantings, the disabled beneficiary may qualify for government benefits because the first trust would have been “counted” as a resource while the second trust will not. Additionally, the beneficial interests of the other children in their new trust are substantially the same as before the decantings occurred.
Questions to consider before decanting a special needs trust in Florida
When considering decanting in the context of special needs trusts, ask these initial questions:
- Is there a compelling reason to decant? (Will the exercise of the power further the purposes of the trust?) Perhaps the existing trust terms will prevent a beneficiary with a disability from qualifying for government benefits.
- Is the trustee an authorized trustee (not a settlor or beneficiary)?
- Does the trustee have the power to invade the principal of the trust?
- Is the beneficiary under a legal disability or does the trustee reasonably believe the beneficiary is incapacitated?
- Is the proposed supplemental needs trust one that the trustee believes would not be considered a resource for purposes of determining whether the beneficiary who has a disability is eligible for government benefits?
- Does the supplemental needs trust benefit the beneficiary with a disability?
- Is the second trust’s beneficial interest substantially similar to the beneficiary’s interest under the first trust? In other words, you cannot substantially change the interests of any beneficiary; the only exception being that the interests of the beneficiary with the disability need only qualify as a supplemental needs trust would normally provide and likely their interests will be changed very substantial in order to qualify.
- Are the beneficiaries of the second trust also beneficiaries of the first trust? In other words, you cannot add new beneficiaries.
If you have answered yes to any of the above questions and are interested in learning more about the expanded opportunities for fixing your special needs trust, please feel free to contact us.