Illinois Estate Planning & Elder Law Blog

One of the major concerns for parents of grandparents of children with disabilities is how to provide for their financial future. Here are some legal tips:

Set up a trust. Any funds left for a disabled child, whether from an estate or the proceeds of a life insurance policy, should be held in trust for his or her benefit. Leaving money for anyone with a disability jeopardizes public benefits. Many people with disabilities cannot manage funds, especially large amounts. Some families disinherit disabled children, relying on their siblings to care for them. This approach is fraught with potential problems. Siblings can be sued, get divorced, disagree on their responsibilities or run off with the funds. It can also cause tax problems for the siblings. The best approach is a trust fund set aside for the disabled child. While parents are usually fully cognizant of this problem when they create their estate plans, other family members who may leave funds to a child with special needs should also revisit their estate plans to make sure that a trust is created.

Even a carefully developed plan can be sabotaged by a well-meaning relative who leaves money directly to the child with a disability. As discussed above, if a trust is created for the benefit of the child, grandparents and other family members should be told about it so that they can direct any bequest they may like to leave to that child through the trust. Grandparents who are worried about the cost of long-term care should also be made aware that, in certain circumstances, they may be able to contribute to a special needs trust for a grandchild without affecting their own future Medicaid eligibility – a win-win situation.

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In her Article about Wills, Julie Garber points out what happens if you do not make a will before you die.

If you die without a will, your estate will be divided up based on the intestacy laws of the state where you live at the time of your death and the intestacy laws of any other state where you own real estate or tangible personal property.

Many times the intestacy laws will give different results from what you would have wanted had you taken the time to make a Will. And if you own real estate or tangible personal property outside of your home state, then you could have two different sets of beneficiaries of your estate.

For example, In Florida, if you’re survived by a spouse and children from the marriage, then your spouse takes the first $60,000 plus 1/2 of the remaining balance and your children share equally in what’s left. But using the same facts in Virginia, your spouse will inherit 100% and your children will receive nothing.

Use the same set of facts, except that your children are from a different spouse. In Florida, your current spouse will inherit 1/2 and your children will share equally in the remaining 1/2, while in Virginia your current spouse will inherit 1/3 and you children will share equally in the remaining 2/3.

The examples illustrate what a difference state intestacy laws can make. The only way to insure that after your death your property will go to the beneficiaries of your choice, when you want them to receive it and in the way that you want them to receive it is to make an estate plan.

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A durable power of attorney is one of the most important estate planning documents there is. It allows someone you appoint – your agent or “attorney-in-fact” – to act in your place for financial purposes when and if you ever become incapacitated. However, many people experience difficulty in getting banks or other financial institutions to recognize the authority of an agent under a power of attorney.

Banks are sometimes reluctant to accept powers of attorney for fear of being sued if the power of attorney is not valid. A certain amount of caution on the part of financial institutions is understandable. Still, some institutions go overboard, for example, requiring that the attorney-in-fact indemnify them against any loss.

If a bank is giving you a hard time about accepting a power of attorney, you can try talking your way up the chain of command. You can also have the lawyer who prepared the power of attorney call the bank. If that doesn’t work, you may have to have a lawyer deal with the bank.

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A report by the Government Accountability Office (GAO) warns that given the weak economy Continuing Care Retirement Communities (CCRCs) are facing challenging times.

CCRCs offer the entire residential continuum of care – from independent housing to assisted living to round-the-clock nursing services – under one “roof”.

In its new report, “Continuing Care Retirement Communities Can Provides Benefits, but Not Without Some Risk”, the GAO notes that although few CCRCs have failed, “challenging economic and real estate market conditions have negatively affected some CCRC’s occupancy and financial condition”. The GAO’s report notes that CCRC residents “are at a disadvantage because any claim they have on a CCRC that is forced into bankruptcy is subordinate to the claims of secured creditors, such as tax-exempt bondholders and mortgage lenders".

CCRCs generally depend on high occupancy rates to remain financially viable. Slow real estate markets like the current one can make it difficult for older Americans to sell their homes to pay CCRC entrance fees. As a result, occupancy levels at many CCRCs have fallen. In addition, some older Americans may be staying in their homes longer and thus moving into CCRCs when they need more care, which can worsen CCRCs’ long-term financial picture.

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