Say a Little Prayer: Aretha Franklin Had No Will, and a Child With Special Needs

According to court documents, legendary singer Aretha Franklin did not have a will when she died, despite reportedly having a son with special needs. The lack of a will opens up the intensely private singer’s estate to public scrutiny and unnecessary costs, and means that there are no specific provisions to protect her son.

Franklin, who died in Michigan at age 76, left behind four sons, but no guidance on how to distribute her estimated $80 million estate. The eldest son, Clarence, age 63, has unspecified special needs and requires “financial and other forms of support for his entire life,” according to the entertainment news site TMZ.

When someone dies without a will – called dying “intestate” — the estate is divided according to state law. Under Michigan law, an unmarried decedent's estate is distributed to his or her children. (Franklin had been married twice but long since divorced.)

Even if the “Queen of Soul” had wanted her estate to go solely to her children, by not having a will or trust, her estate will have to go through a long public probate process, which will likely cost her estate considerable money. If Franklin had created an estate plan that included a will and a trust, she could have avoided probate and kept the details of her financial circumstances private.

But perhaps even more importantly, that estate plan could have made special provisions to ensure that Clarence would receive proper care for the rest of his life. Franklin could have established a special needs trust to preserve any public benefits Clarence may be receiving, or perhaps allocated him a larger share of her estate. She also could have accompanied a financial plan for him with a Memorandum of Intent (also called a “Letter of Intent”) to serve as the primary source of information about her son’s care, providing a roadmap for the courts, guardians, caregivers and others involved in his life.

Clarence could also be harmed by the absence of a will because it opens up an estate to potential challenges that could drag out the probate process. Without a will to clearly state the decedent's intent, litigation resulting from family conflicts often eats into estates.

Finally, Franklin’s estate will be subject to unnecessary estate taxation, leaving even less for Clarence and her other sons. Although she may not have been able to avoid estate tax entirely, there are steps she could have taken to reduce the amount her estate will have to pay.

“I was after her for a number of years to do a trust,” attorney Don Wilson, who represented Franklin in entertainment matters for the past 28 years, told the Detroit Free Press. “It would have expedited things and kept them out of probate, and kept things private.”

Estate planning is important even if you don't have Aretha Franklin's assets, and it’s doubly crucial if you have a child with special needs as she did. It allows you, while you are still living, to ensure that your property will go to the people you want, in the way you want, and when you want, and to create special protections for the child with special needs before it’s too late. You don’t want your plan for your loved ones to simply be “I Say a Little Prayer.”

Contact your special needs planner to begin working on your estate plan now.


Don’t Forget Long-Term Care Costs When Planning Your Estate

When discussing estate planning with clients or potential clients, the meeting usually begins with questions about who will receive property, who will make medical and/or financial decisions upon incapacity, and how to minimize taxes  and the costs of estate administration.  Most individuals tend to shy away from discussing how to pay for long-term care or nursing home expenses as it is not easy to talk about the unpleasant thought of needing nursing home care.  No one wants to go into a nursing home. I believe many families are sincere when they say they will not let mom or dad go into a nursing facility or they will care for them at home.  Sometimes, however, it is just not safe for someone to remain at home and skilled nursing care is the only option.

Long-term care expenses can cost six figures annually in some states, and generally speaking are not covered by Medicare or your private health insurance policy. Although there are several strategies to protect your assets in the event you require long-term medical care, we will focus on two of the more common financial and legal strategies for this article.

Long-Term Care Insurance

Long-term care insurance policies should be considered as an option to pay for long-term care in the event care is needed.  There are different options for coverage, so discussing your needs with a qualified insurance representative and elder law attorney is very important to ensure you are protected.

Irrevocable Trust

Asset protection using an irrevocable trust is another option to protecting your assets from estate recovery should you need long-term care. Because of the 5-year look-back period rules involving trusts, this type of planning must be done at least five years before the need for long-term care and the filing of a Medicaid/MassHealth application. A consultation with a qualified estate planning and elder law attorney is highly recommended if considering an irrevocable trust strategy.

As discussed above, we discussed only two strategies for purposes of this article. Each family’s situation should be discussed on a case-by-case basis to determine what strategies are appropriate.  Many different factors such as health, family dynamic, assets/income, and whether we are working with a spousal couple or single/surviving spouse are a few examples of the factors we must evaluate to determine what options our families have.  Please call our office to schedule a consultation to discuss what’s best for your family.

The Estate Planning Discussion We Keep Putting Off

Estate Planning.  Talking about death and dying is not high on the list of conversations we are comfortable having.  If this describes you, you are not alone.  According to AARP, approximately 60% of Americans do not have a Will. Without a Will, your probate property will be distributed according to the laws of the State that you live in. In addition, a Probate Judge will appoint your executor/personal representative and decide who will be the guardian of your minor children.

Essential estate plan documents that everyone should have include a Will, durable power of attorney and health care proxy.  These documents allow you to make critical decisions regarding your property, family and health. These are decisions that we should be making, not a Probate Court Judge.

As important as a Will is, an estate plan is not complete after you sign your Will.  In the event you are unable to make decisions for yourself, consideration should be given as to who will step in to make those decisions for you.  A durable power of attorney addresses any financial decisions that need to be made, and a health care proxy covers medical decisions that need to be made if you are unable to make those decisions yourself. Without these documents, a petition would need to be filed requesting guardianship and/or conservatorship. As with any legal proceeding, this process is usually time consuming, costly and public.

As note above, everyone needs a basic estate plan. Additional questions that should be discussed during the planning process include:

  • Should you avoid the probate process (estate administration)?
  • Do you have family with special needs?
  • Do you have family with addiction, gambling or spendthrift issues?
  • Do you have family that have pending or potential divorce or bankruptcy issues?
  • Are you in a subsequent marriage or have children from a prior marriage?
  • Do you have assets that you would like to preserve for family in the event you require long-term care?

If you answered yes (or don’t know the answer) to the questions above, then additional estate planning strategies should be discussed.  Please call our office to request a free resource to help you begin the planning process.

 

Protecting Your Home From The Costs Of Long-Term Care

There are several planning options when it comes to protecting assets from the rising costs of long-term care.  For purposes of this article, we will focus on the use of an irrevocable trust to protect the home and other assets and whether it is still a viable option.  If you have started to think about, or are concerned about, the potential costs of long-term care, for yourself or an aging parent, you may want to investigate all options regarding advanced planning to protect your family’s financial and estate plan.

When someone requires skilled nursing or rehabilitation care, the first question usually asked is, “who is going to pay for this care?”  Medicare may cover costs at the onset of care, but only for a limited time.  If continuous care is needed, your options include privately paying out of your own funds, or applying for Medicaid benefits.  Applying for Medicaid comes with strict asset and income eligibility requirements.

Medicaid, administered in Massachusetts by MassHealth, is a joint federal and state program for impoverished people to cover the costs of long-term care.  As noted above, MassHealth has strict asset and income limits when determining eligibility. The rules also change depending on whether you are applying as a single individual/surviving spouse or as part of a spousal couple. This will have a direct impact on how your home will be viewed as part of your asset limit and potential estate recovery lien.

Generally speaking, an applicant can have no more than $2,000 of countable assets.  There are additional asset and income rules if there is a spouse living in the primary residence which are beyond the scope of this article.

Although there are several options to consider when discussing advanced planning for asset protection, we will be focusing on the use of an irrevocable trust as a strategy to protect assets from the costs of long-term care. These assets include real estate, investments, rental property and other liquid assets. Transferring your home or other assets to an irrevocable trust has advantages and disadvantages.  With a properly drafted trust, assets owned by the trust would avoid estate recovery following the five year look back period.  The transfer of assets to an irrevocable trust will provide protection from the grantor’s creditors as well as the children’s creditors.   There are also tax benefits that you retain by using an irrevocable trust that may not be available with outright transfers to children.

Although there are several reasons to consider asset protection planning, careful thought must be taken before utilizing this strategy.  As this is an irrevocable trust, control and management of trust assets is held by the trustee, which we recommend is not the grantor.  As a result, you will not enjoy the same control you have over assets as if the asset were owned and held outside of trust.  In addition, MassHealth may question and challenge the trust, therefore, we must ensure no more control is given then allowed. Tax benefits and ramifications must also be considered.

As this is a very specialized area of the law, it is highly recommended that you consult with a qualified estate planning and/or elder law attorney to discuss your personal situation.

 

Five Practical Uses for an ABLE Account

We have previously written about the pros and cons of ABLE (Achieving a Better Life Experience Act of 2014) accounts. These accounts allow many people with disabilities or their families to establish tax-free savings accounts that won’t affect their ability to qualify for, or remain on, government assistance as long as the account balance does not exceed $100,000. But ABLE accounts can be more than simply a savings vehicle.  The accounts can be used in many creative ways, either alone or in conjunction with other planning tools, to make a big difference to families with special needs children.

Any adult child with special needs who owns more than $2,000 in countable assets is generally ineligible for many public benefits programs, including Medicaid and Supplemental Security Income (SSI). But because an ABLE account with a balance below $100,000 is not counted as a resource for most public benefits programs, the account provides an opportunity for planning to ensure that the child does not become ineligible because of wages, gifts, or other sources of funds that may become available to her.  Here are five practical uses for an ABLE account that could have a significant impact on a beneficiary’s quality of life:

Protecting UGMA/UTMA account funds: Does your child have a savings account in his or her own name? Perhaps gifts from family over the years were deposited into the child’s account? Such an account is often known as an “UGMA (or UTMA) account,” named after the Uniform Gifts (or Transfers) to Minors Act, the law that governs bank accounts owned by minors.

When the child becomes an adult, that bank account will  suddenly be counted as a resource for purposes of determining eligibility for many public benefits programs. One practical use of an ABLE account is as a repository for money from an UGMA/UTMA account of a child who is coming of age so that it will not be counted in determining her continued eligibility for public benefits.

Shielding income: Another practical use for an ABLE account is as a receptacle for child support, alimony, or even earned wages. Using an ABLE account for sources of income such as these shields them from being counted as a resource of the child. If more than $2,000 is accumulated by the child over time in an ABLE account, the eligibility for government programs is protected. In addition, an ABLE account is flexible enough that payments deposited into an account can easily be used to pay for many of the expenses a child may have.

Substituting for a special needs trust: An ABLE account can play a beneficial role if your child is expecting to receive a small settlement or award, or even an inheritance or gift.  In some cases, an ABLE account may even make it unnecessary to go through the time and expense of creating a special needs trust. Here’s how this might work for a child receiving, say, a a $150,000 settlement. Although no more than $15,000 can be deposited into an ABLE account each year, and an individual can have only one ABLE account, there are still options. The child could transfer $15,000 into her ABLE account, and a structured annuity could be purchased with the remaining $136,000 that would fund the ABLE account for a certain amount each month so that the total deposited into the account each year would not exceed $15,000.  In this way, a complex special needs trust could be avoided.

Giving the child financial control: Perhaps the most important practical use of an ABLE account is that it can be managed and controlled by the child. If a special needs trust were used, a trustee would be required to approve each and every expenditure.  Instead, an ABLE account gives the child access to money that she alone can decide how to spend, which, in turn, can provide a boost in self-esteem because the child is in a position to make these financial decisions herself. This autonomy also allows the child to make decisions on saving money. Through an ABLE account, the child can decide whether or not to save money for such things as a home, a car, or even a wedding.

Paying household expenses: Another beneficial use of an ABLE account is using it to pay for utilities and other housing expenses without triggering SSI’s “in-kind support and maintenance” (or ISM) penalty that would otherwise be incurred if a third party, including a special needs trust, made the same expenditure. When it comes to  its ISM rules, the Social Security Administration views money in an ABLE account as if it were the SSI beneficiary’s money, so there is no penalty when the recipient of a government benefit uses her own funds from an ABLE account to pay for her own housing expenses.

When it comes to planning for your child’s needs, it is important not only to consider the advantages of an ABLE account standing alone, but also to realize that an ABLE account can be used in conjunction with other planning tools, such as a special needs trust, to craft a strategy that best fits your child’s needs now and in the future. Even as just one piece of a larger puzzle, an ABLE account may be able to offer so much more to your child.

To find out how an ABLE account might benefit your child with special needs, contact your special needs planner.

 

How to Earn Additional Income Without Losing SSI Benefits

Although Supplemental Security Income (SSI) recipients are subject to rigid asset limits, the federal government has provided a few avenues for beneficiaries to earn income that supplements their SSI benefit.

The Social Security Act imposes a $2,000 asset limit on SSI beneficiaries, a figure that has remained frozen since 1989. For couples, the limit is $3,000.  For 2018, the maximum monthly SSI benefit is $750, although many states provide a further supplement.

However, the Social Security Administration (SSA) will not necessarily reduce the SSI benefit based on additional income. For each dollar earned above the monthly maximum amount, the SSA reduces the person’s monthly benefit by $0.50.  However, the SSA excludes a person’s first $85 in monthly earned income. Furthermore, SSI beneficiaries under age 22 or enrolled in school or a vocational training program can earn up to $1,790 in monthly income (up to $7,200 annually) without jeopardizing their SSI benefit or eligibility.

For other SSI beneficiaries looking to enter the workforce or return to work, the Plan for Achieving Self-Support (PASS) program may be an option for covering costs associated with job training or starting a business. Candidates for the program must submit applications to the SSA that detail their work goals, specify requested items and services and provide cost estimates, among other requirements.

If the SSA terminates a person’s benefits due to excessive earnings, an expedited recertification option exists for people who reapply within five years.

Another option for SSI recipients is the Ticket to Work program. The purpose of this program, which is available to both SSI and Social Security Disability Insurance (SSDI) recipients, is to provide a trial work period for beneficiaries without losing benefits.

Under this program, SSI beneficiaries can make more than $840 a month for nine months before their benefits are cut off. The nine months can either be consecutive or spread over a five-year period.

Assuming earnings continue after the trial period, benefits are cut off. But if a person’s earnings fall below this amount during the three years succeeding the trial period, benefits can be immediately restored.

For more information, click here to read the SSA’s pamphlet “Working While Disabled: How We Can Help.”

Should You Have a Care Committee in Your Special Needs Trust?


Most special needs trusts give their trustee wide authority, often appropriately so, to respond to unforeseen circumstances. But for those concerned about placing some checks and balances on the trustee’s authority, one possible option is a care committee.

Special needs trusts are trusts designed to protect the assets of a person with disabilities. The trustee is the person tasked with managing and distributing the trust’s assets on the beneficiaries’ behalf.

As previously discussed here, in addition to the trustee, many trusts create a separate care committee, either explicitly in the trust or through a separate memorandum of intent. Care committees, also commonly known as “trust advisory committees,” are typically granted the right to review accountings, to examine records, and to remove and replace the trustee.  To use an analogy from the corporate world, the trustee is the CEO and the care committee is the board of directors. The care committee may also be given the authority to amend the trust, veto certain distributions or participate in other decisions.

A downside to the creation of a care committee is that it can slow down the decision making process, at the expense of the beneficiary. Likewise, a care committee can deny the trustee the appropriate flexibility to act in the person with disability’s best interests.

To see if a care committee is right for your special needs trust, contact your special needs planner.

How Does Workers’ Comp Affect SSDI Benefits?

Some people become disabled as the result of a work-related illness or injury. In these cases, the individual may be eligible for both Social Security Disability Insurance (SSDI) and workers’ compensation benefits. Unfortunately, their total benefits may be limited by what is known as the “workers’ compensation offset.”

Key to understanding the interplay between the two programs is to understand their separate purposes. Workers’ comp programs, which are run at the state level, seek to compensate workers who suffer job-related illnesses or injuries. SSDI is a federal program that compensates people with sufficient work histories who are considered unemployable due to their disabilities, regardless of any connection between their work and the disability.

Not all people who qualify for workers’ comp will also be eligible for SSDI, which sets a strict eligibility standard. Specifically, the Social Security Administration (SSA) defines disability for SSDI purposes as “the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment(s) which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.”

Workers’ comp eligibility standards are more flexible. In New York State, for example, workers’ comp beneficiaries can be deemed to have total or partial disabilities, and either of these can be classified as permanent or temporary.

Since monthly benefits tend to be significantly higher under workers’ comp, the Social Security Administration (SSA) imposes a cap on SSDI payments when people receive both types of benefits.

Under the “workers’ compensation offset,” created by Congress in 1965, the total amount from SSDI and workers’ comp cannot exceed 80 percent of the person’s “average current earning,” or the total SSDI received by the recipient’s entire family during the first month receiving workers’ comp, whichever is higher. In most cases, the former is higher.

Here’s an example of how the offset works: Before she became disabled, Sally’s average earnings were $4,000 a month. Sally is eligible to receive a total of $2,200 a month in SSDI benefits. Sally also receives $2,000 a month from workers’ compensation. Because the total amount of benefits she would receive ($4,200) is more than 80 percent ($3,200) of her average current earnings ($4,000), her SSDI benefits will be reduced by $1,000 ($4,200 – $3,200).

The SSA calculates “average current earnings” based on the highest monthly earnings under one of three formulas.

  • The average monthly wage used for determining the SSDI amount
  • The average monthly wage based on the person’s five highest earning years in a row
  • The average monthly wage based on the single year that the person’s disability began or any one of the five previous years

Some workers’ compensation claimants receive a lump-sum payment in addition to, or instead of, a monthly benefit. These payments may also reduce the amount of SSDI received, although attorneys will try to draft settlement agreements to minimize the workers’ comp offset.

While in most states, the workers’ compensation offset works to reduce the person’s SSDI, 16 states have adopted a “reverse offset” program. In these states, the person’s workers’ comp, rather than their SSDI benefit, will be reduced to meet the SSA’s prescribed formulas.

To read the SSA’s guide “How Workers’ Compensation and Other Disability Payments May Affect Your Benefits,” click here.

 

Do I Qualify For Disability With Pervasive Developmental Disorder (PDD-NOS)

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PDD-NOS stands for Pervasive Developmental Disorder-Not Otherwise Specified (PDD-NOS). PDD-NOS was one of several autism diagnoses that are now included in the overall diagnosis of autism spectrum disorder (ASD) with the publication of the DSM-V.

In the DSM-IV, the essential features of PDD-NOS are severe and pervasive impairment in the development of reciprocal social interaction or verbal and nonverbal communication skills; and stereotyped behaviors, interests, and activities. The criteria for Autistic Disorder are not met because of late age onset; atypical and/or sub- threshold symptomotology are present.

You may meet the criteria for disability if you meet the requirements of one of Social Security’s official disability listings.  Social Security publishes the criteria for a number of common illnesses to qualify for disability, and if you meet the criteria for your particular condition, you automatically qualify for benefits.

The listing for Autism Spectrum Disorders for adults is 12.10:

12.10 Autism spectrum disorder (see 12.00B8), satisfied by A and B:

  1. Medical documentation of both of the following:
    1. Qualitative deficits in verbal communication, nonverbal communication, and social interaction; and
    2. Significantly restricted, repetitive patterns of behavior, interests, or activities.

AND

  1. Extreme limitation of one, or marked limitation of two, of the following areas of mental functioning (see 12.00F):
    1. Understand, remember, or apply information (see 12.00E1).
    2. Interact with others (see 12.00E2).
    3. Concentrate, persist, or maintain pace (see 12.00E3).
    4. Adapt or manage oneself (see 12.00E4).

The listing for Autism Spectrum Disorders for children is 112.10:

112.10 Autism spectrum disorder (see 112.00B8), for children age 3 to attainment of age 18), satisfied by A and B:

  1. Medical documentation of both of the following:
    1. Qualitative deficits in verbal communication, nonverbal communication, and social interaction; and
    2. Significantly restricted, repetitive patterns of behavior, interests, or activities.

AND

  1. Extreme limitation of one, or marked limitation of two, of the following areas of mental functioning (see 112.00F):
    1. Understand, remember, or apply information (see 112.00E1).
    2. Interact with others (see 112.00E2).
    3. Concentrate, persist, or maintain pace (see 112.00E3).
    4. Adapt or manage oneself (see 112.00E4).

If you do not meet the listing, you may still qualify for disability benefits if you are not performing substantial gainful activity and if the impairment prevents you from doing your past relevant work or other work that exists in significant numbers in the national economy.

For children, to functionally equal the listings, an impairment(s) must be of listing-level severity; that is, it must result in “marked” limitations in two domains of functioning or an “extreme” limitation in one domain.  Domains are broad areas of functioning intended to capture all of what a child can or cannot do. SSA uses the following six domains:

  1. Acquiring and using information,
  2. Attending and completing tasks,
  3. Interacting and relating with others,
  4. Moving about and manipulating objects,
  5. Caring for yourself, and
  6. Health and physical well-being.

Please call our office at (508) 421-4610 if you have any questions about applying for disability with Pervasive Developmental Disorder (PDD-NOS) or the application process in general.

 

How Do You Apply For Social Security Disability?

The basic steps you need to know when applying for Social Security Disability