How to Eliminate Estate Taxes on Your Residence

Make Gifts Before 2011. Unless Congress is able to agree on what the estate tax ought to be after the November election, the estate tax will automatically be reinstated January 1, 2011 with an exemption of only $1,000,000 and a maximum tax rate of 55%. This is because the Bush phase out of the estate tax expires by its own terms at the end of 2010. In 2010, there is no estate tax and this presents a last minute opportunity to reduce estate taxes. According to our informal, unscientific survey of advisors, most tax advisors are convinced that a reported gift in 2010 will not be deducted in the future from the $1,000,000 estate tax deduction after 2010; a minority of advisors believe the government will be able to subject gifts completed in 2010 to a future estate tax. If our majority is correct, a way to save on future estate taxes is to make gifts in 2010 because in 2010, gifts do not reduce the future $1,000,000 estate tax exemption, but the same gifts made only months later in January 2011 will reduce the $1,000,000 estate tax exemption. Gifts made in 2010 greater than the $13,000 exemption per person do reduce each person's $1,000,000 exemption from gift taxes. If you had a chance to get a 55% reduction, would you take advantage of this 55% discount?

Story of Sam and Sally. Sam is a retired government employee and he and his wife Sally own their home in the wealthy Washington suburbs worth $1.5 million; they bought it years ago for $100,000. They paid off their mortgage. Sam invested in the stock market, has a retirement account from the federal government, life insurance and some rental property totaling about $1,000,000. Sally also has her investments, retirement funds and savings which total $1,000,000. Sam and Sally have set up revocable living trusts which will maximize use of each of their individual estate tax exemptions in 2011. If Sam and Sally die after 2010 when there is $1,000,000 per person exemption, their total combined estate tax exemption would be $2,000,000. Because Sam and Sally's taxable estate totals $3,500,000 less their combined exemptions of $2,000,000, they would pay estate taxes on $1,500,000 for a tax of about $750,000 in 2011.

Property Settlement Agreement. Sam and Sally change the title to their house so that each of them owns 50% of their residence as tenants in common. Sam and Sally enter into a property settlement agreement which specifically prohibits either of them going to court and asking the court to order a sale of the property. This is called an action for partition, which will be prohibited by their property settlement agreement.

Appraisal Provides 35% Discount. They obtain an appraisal of the value of their 50% interest in the residence and the appraiser issues a well documented opinion that a 50% interest in the residence is worth not $750,000 (one half of the $1,500,000 market value), but is worth $500,000, a discount of about 35%. This is because a 50% interest is a divided interest and people are not willing to pay full price for a property in which they will only own 50%. Also, due to the prohibition of a partition action, if a person bought a 50% interest, the buyer could not get out of the investment until the other owner agreed to sell the property, which is a restriction on transfer. In the past, the combined discounts resulting from a restriction on transfer and a divided interest were as high as 50% on such arrangements.

Establish Qualified Personal Residence Trusts. Sam and Sally each then execute their own qualified personal residence trust (QPRT). A QPRT is allowed under IRS regulations and must comply with those regulations. The terms of the QPRT say that each will own and have the right to reside in the property during a certain number of years and after that time period, they no longer own the property. After the selected time period, the children will own the property through the trusts. Each of Sam and Sally select different time periods that is less than their individual life expectancy. They then transfer their interest to their QPRTs and the QPRTs are also bound by their property settlement agreement which prohibits a partial action. After the time period in the QPRT, they rent the residence from their children or move to a retirement community, based upon what Sam and Sally want to do at that time.

QPRT Reduction in Value of Gift. Because Sam and Sally have given a future interest to their children in their residence, Sam and Sally have to file a gift tax return reporting the amount of the gifts made to their children. The accountant must calculate the value of the gifts. First, the house is reduced in value from $1,500,000 to $1,000,000 due to the property settlement agreement. Because the children will not received the gift of the residence for several years (the time periods set forth in the QPRTs), the value of the gifts is further reduced as a result of the use of the QPRT. If someone agrees to pay you $100 ten years from now, you would not give them $100 today. You may give them $50 because for you, the present value of $100 ten years from now is $50. The IRS has tables to calculate this. As a result of these calculations, the value of the QPRT gifts to the children of the entire residence total $500,000, a combined reduction of $1,000,000. Because Same and Sally each made a gift worth $250,000, if our majority is correct, they each reduce their er person $1,000,000 gift tax exemption by $250,000 each, but none of their future tax exemption.

Magic of 2010. According to our majority, the opportunity of 2010 is that any gift in 2010 under current law does not reduce the future $1,000,000 estate tax exemption. Thus, if Sam and Sally complete these gifts in 2010, they still will each have a $1,000,000 estate tax exemption in 2011. But, if they were to make this gift in January of 2011, their joint gift of $500,000 less in total combined exemptions from estate taxes. Of course, this process provides even more tax reductions for residences worth more than $1,500,000.

Estate Tax Eliminated. Sam and Sally both live their life expectancies and so now the trusts for their children own their personal residence. When Sam and Sally die, then their personal residence is completely out of their taxable estate and Sam and Sally's children own the residence which is what Sam and Sally wanted from the beginning. Their children can keep or sell the residence as determined by the children. The children could have higher capital gains taxes as a result of the QPRT, unless they use available exemptions or deferrals from capital gains taxes. Therefore, rather than having a taxable estate of $3,500,000, now that Sam and Sally's $1,500,000 residence is out of their taxable estate, their taxable estate is $2,000,000 or more before they both died. Because they made their QPRT gifts in 2010, they still each have their $1,000,000 estate tax exemptions under the majority view and they no longer have a taxable estate ($2,000,000 estate less $2,000,000 in exemptions). Their estate saves $750,000 in estate taxes.

Must Survive the Time Period. If Sam or Sally do not live to their life expectancy and do not survive the time period of the QPRT, then the discounted value of their share of the residence is still part of their taxable estate. They may not have benefited from the planning fees and costs for the QPRTs, but their tax liability is the same as if they did not use the QPRTs and their taxes are less because of the property settlement agreement. If they do survive the time period, then they may rent the house from the trusts for their children and this rent will enable them to transfer more wealth to their children without any estate taxes on this transfer. Such rent payments will not be subject to a gift tax or reduction of their exemptions from gift taxes.

Must Start Now. You must immediately get started on this. It takes about 90 days to obtain such appraisals and the transfer must be done before January 1, 2011 to take advantage of this window of opportunity. We will still use these strategies in 2011, but they will not give you the same extraordinary level of benefits as they do in 2010. Even if the minority is correct, you have removed a valuable asset when real estate prices are low and have removed all of the appreciation in the real estate over a several year period from your estate. Call us to get this underway.

Avoiding the Bag-Lady Syndrome; Living on the Street, Old, Female and Broke; Put Your Protections in Place

Bag Lady Syndrome. A woman can be independently wealthy and suffer from the "bag lady syndrome". This is the fear that they will lose all of their money and have to live on the streets, with bags full of old ratty clothes as their only possessions. According the Olivia Mellan, author of the Advisor's Guide to Money Psychology and a Washington DC therapist, the bag lady syndrome can plague and sometimes paralyze women who want to better plan their finances, as reported in MSN Money. We find that women doing estate and financial planning often fear that they will be penniless, homeless and abandoned on the streets. In our experience, the bag lady syndrome is based upon some real life defects in the plans of many people.

What Will She Live On? In planning for married couples, we often ask: If John your husband dies, what will Mary (his wife) live on? We find that usually the couple does not have a good answer to this question. This is something that each married couple should plan for with a financial planner. It may mean insurance, savings and a retirement account. Often when the husband dies, his income stops or the retirement pay from the husband is cut in half. This means that there needs to be concrete dollars in place for the surviving spouse, whether the surviving spouse is the husband or the wife. The same is true for couples who live together but who are not married, a growing segment of the population.

Are Diamonds A Girl's Best Friend? In the past, women were financially dependent on men; this is still true in many countries even today. With the entry of women into the workforce, the professions, corporate leadership and with women forming most new small businesses, this is no longer true for many modern women. With a fifty percent or higher divorce rate, women need to make sure they have their money set aside in their own retirement accounts or other means of financial security. A woman's best friend is her own bank account, investment and retirement funds.

Do You Have Your Trusted Ones Ready and Able? The primary legal planning issue for a single male or female is not estate taxes, but who will have the legal power to take care of them when they become disabled. We meet with widows, widowers, singles and divorced people frequently, who if they become disabled, have no legal papers in place that will allow their trusted loved ones to take care of them. With the increasing level of rules and regulations regarding bank accounts and finances, the sister or brother can not walk into the bank of their disabled sister and start writing checks to pay the disabled sister's bills. It is common for financial institutions not to honor powers of attorney for a variety of reasons - its not their form, they don't know the person presenting the power of attorney, federal know your customer regulations, or the power of attorney is too old. For the person who needs to immediately pay some bills, it doesn't matter that the reasons may be bogus. The net effect is that they can not take care of their sister, mother, or best friend. The most effective solution is the setting up of a living trust with a Disability Panel and the transfer of all of the non retirement assets of the single person to their living trust. We have never had a call that the trustee of a single person's trust was not able to use the funds in the trust to take care of the person who set up the trust. From the thousands of attorneys in our national association, our anecdotal evidence is that throughout the US living trust planning puts in place the legal powers and the people to take care of disabled single persons.

Are You Comfortable with Gifts? If you have the bag lady syndrome, you will be too afriad to make gifts that will help the next generations, your favorite charity and greatly reduce your estate taxe. There are time tested formulas to determine how much is safe to give away even if the economy is depressed. Such financial calculating tools are availbale to most sophisticated financial planners.

Stay off the Street. Make sure you know waht money you will have if your spouse dies, have your own nest egg and have your living trust in place to take care of you, and you will not be a bag lady. Call our planning team to implement these protections for you.

Raise Taxes

Tax Increases. The big debate in Washington is now over whether to let the Bush era tax cuts expire at the end of this December for some or all taxpayers. If these tax cuts expire, then the income tax rates and capital gain rates will increase, maximum dividend rates will go from 15% to the highest individual rate of 39.6%, the estate tax exemption goes to $1,000,000 with a 55% rate, the child tax credit reduces from $1,000 to $500 and there will be limits on the tuition and earned income tax credits. The Obama Administration has proposed retaining the Bush tax cuts for income earners below $250,000 married and $200,000 single. Tax cut proponents want to extend all of the Bush tax cuts and government proponents want all of them to expire. This is like a debate about how to arrange the deck chairs on the Titanic as it sinks.

You Can’t Handle the Truth. Politicians in both parties believe you can’t handle the truth. The truth is that the growing budget deficit largely comes from the rapid growth in Social Security, Medicare and Medicaid costs and interest expenses. The Obama administration estimated in January that the expiration of the Bush tax cuts for the poor, middle class and wealthy would bring in an additional $5 trillion over ten years. But, the estimates are that the deficit will be $8 to $10 trillion or even $15 trillion in the next 10 years. US public debt is expected to reach 62% of the economy in 2010 according to a recent Congressional Budget Office (CBO) estimate, nearly double the historic average. By 2030, CBO estimates that debt will be 146% of the Gross National Product. Unfunded age-related spending for pension and health care obligations are the fundamental drivers for this and the US will have the second highest increase in age related expenditures of the twenty largest world economies. Congress fails to report the unfunded obligations for entitlements in its annual budgets. These entitlement obligations are on autopilot and have first call on federal dollars.

What this Means for You. Our goal is to help you plan for your future and not get bogged down in political disputes. What does this mean for you:
*Your Income and Capital Gain Taxes Are Going up. Taxes are going up on everyone, regardless of your income bracket.
*You are much more likely to pay estate taxes.
*Your government benefits will be cut.
*The cuts in governmental benefits will get even bigger in the next two decades.
*The government is likely to print money to pay its bills.
*The US government will face a debt crisis similar to those of many countries.

What to Do:
*Take advantage of the lower income and capital gain rates this year.
* Make non taxable gifts this year to reduce your future estate taxes.
*Protect your assets from people who want to take them away from you now and in the future. Expert Rob Slee is projecting that 25% of Americans will be making money and will have to carry the load for the 75% who will have a hard time earning a living wage in this world economy. Through lawsuits, crime and taxes, the 75% will take money from the 25%.
*Decide on your approach to investments. We are not qualified to advise you on how to invest your funds. The only thing we seem to know for sure is that we are in a period of rapid change in technology, the world economy and lifestyles. This leads me to believe that you need to be covered for anything that can happen-deflation, inflation, drop in the dollar, rise in the dollar, recession or a new boom in the world economy. You need not just diversify your investment portfolio, but also diversify among the philosophies of your financial advisors.

Take Action Now. There are less than 150 days left of the lowest tax rates you will experience for a decade. Call us now to take advantage of this disappearing opportunity.

Do Not Make A Will; For A Married Man, Making a Will is a Dangerous Illusion; No Problems Solved Without Changing Names on Your Accounts and House

The Will Illusion. We have all heard the TV and radio ads that you need to make a will and should hire a computer, not an expensive lawyer, to make the will. I have advised married men that only making a will is just an illusion that lulls them into a dangerous complacency. It is worse when the husband wants to make a will without his wife’s participation.

Why Do a Will: Most married men who sign a will want to accomplish the following objectives: Make sure their property goes to their spouse and children; designate who will be the guardian of their children; make sure things go smoothly when they die; and protect the inheritance of their children. For the typical married man, none of these objectives are likely to be accomplished.

Ensure Property Goes to Spouse. Seventy percent of married men own their house, bank and brokerage accounts and household goods jointly with their wives. The number is higher for first time married men. These men also usually designate their wives as the sole beneficiary of their retirement accounts and life insurance policies. They then sign a will, thinking they have protected their wives and children. Most men die before their wives. When the man dies, survived by the wife, everything goes to their wives due to the fact that all of their property is owned jointly with their wives and the will has no affect on the beneficiary designations on their insurance or retirement accounts. There is no protection of his wife of against her creditors or her disability and estate taxes will be higher. This is because the title to property overrides any provision of the will. If the man named his parents as the beneficiaries on his insurance or retirement accounts and did not change the beneficiary designations when he got married, then these accounts go to his parents if they survive him or to a probate estate if they do not, and not directly to his wife. Beneficiary designations override the provisions of a will.

Protect His Children. Often, the married men I advise want to make sure that after taking care of their wives, their property goes to their children, and they want their will to say that. But, if the wife survives the husband, everything goes directly to her either by title or because the will says so. If the wife remarries, there is no protection for his children and all of man’s share of the property will go to the next husband and his children if the next husband survives his wife or one half to the next husband if there is a divorce. I have talked to many children who were unintentionally disinherited this way.

Guardians for His Children. Husband dies first, survived by wife. Wife is now the guardian of the children and wife now decides who will be the guardian of his children if she then dies. The husband’s will is irrelevant at this point. Also, if the children are minors or disabled and if the wife does not have a will, in most states, the court will appoint the guardian and supervise the finances of the children until they are 18, depending upon the legal age for children in their state.

Things Go Smoothly. Many people I have advised think that a will avoids probate. Not so; the will’s purpose is to direct the probate process. Instead, any property passing under a will must be probated. Probate is the state law process requiring that the will and a detailed list of assets are filed on the public record. Someday soon, your neighbor may be able to go on line and see to whom you left your property. There are notice and accounting requirements, which vary from state to state and in some states are quite onerous and expensive to comply with. Probating a will is like filing a lawsuit against yourself, with a notice for everyone who has a claim to join in the lawsuit without the need to hire an attorney or file their own case.

Solutions That Do Not Work. The solution is not to make sure the wife dies first. Even if husband and wife make identical wills, and the husband dies first, none of the above is really changed much because the wife has a will. Non married couples come out ahead if they do not own their property jointly because the non married man’s will determines who inherits his separately owned property. Some married couples go so far as to get rid of jointly owned property, thereby requiring a probate when the husband dies and then again when the wife dies. This makes the probate lawyers a lot of fees.

Solutions that Work. To accomplish the goals of the married man, he needs to set up a living trust and put the name of the trust on his accounts and real estate and name his trust as the death beneficiary of his insurance and retirement accounts. To have an estate plan which accomplishes your goals, call us for an appointment.

Losing Your Business to Estate Taxes: George Steinbrenner & Jack Kent Cooke

Steinbrenner Dies With No Federal Estate Taxes in 2010. Owner George Steinbrenner built the New York Yankees from a team worth $10 million to a team worth $1.3 to $1.6 billion, one of the most valuable sport franchises in the world. Because Steinbrenner died in 2010 when there is no federal estate tax, his heirs can inherit the team without losing it to crushing federal estate taxes. Also, as a Florida resident, he may have avoided state estate taxes. In contrast, when John Kent Cooke died as the former owner of the Washington Redskins, half or more of his estate could have gone to federal and state estate taxes. A factor in the loss of the team by Cooke’s son was the structure of Cooke’s estate plan, which had the effect of dramatically cutting Cooke’s estate taxes.

Charitable Deduction. Cooke used charitable planning to avoid a huge estate tax bill in his $825 million estate. Cooke died in 1997 when more than half of his estate could have gone to pay estate taxes. By leaving the Redskins and most of the other assets of his estate to a Family Foundation which he qualified as a charity, his estate was able to deduct from his estate taxes the gift to the charity and thereby avoid most of the estate taxes. He left the Redskins to the Foundation with instructions to sell the team. The Foundation put the Redskins up for sale to the highest bidder. Cooke’s son lost the team because he was outbid by an investment team headed by Daniel Snyder, the current owner. Cooke did not buy a large enough life insurance policy to provide the tax free funds his son needed to be able to pay the top price for the team.

Cooke Saves Team in 2010. If Cooke had had the fortune to die in 2010 when there was no estate tax, he could have eliminated the Foundation and left the team to his son. He would not have had to use the John Kent Cooke Foundation to avoid estate taxes. Of course, the John Kent Cooke Foundation does provide many millions of dollars in scholarships to talented low income students and that is a general benefit to our country.

Estate Tax Free. The Steinbrenner heirs can inherit the New York Yankees and other assets if allotted to them by Steinbrenner’s estate plan without a federal estate tax. However, if Steinbrenner had not updated his estate plan to take advantage of the one year window of no federal estate taxes in 2010, then he too may have left the bulk of his estate to a foundation and his heirs could lose the Yankees due to such estate tax avoidance techniques.

No Action Yet From Congress. At the beginning of 2010, there was talk that Congress would pass a law bringing back the estate tax for 2010. A bill passed the House, but the latest reports are that the Senate cannot come to an agreement on a new estate tax. With each passing day, there is less likelihood of an attempt by Congress to retroactively impose a federal estate tax in 2010.

Lesson Learned: Update and Revise Now. Make sure your plan includes the best options for the rules in 2010. Call us for a review and update of your plan today.

Asset Protection Denied with LLC: Single member LLC subject to court sale of interests; Charging Order Not Sole Remedy

No Surprise to US. Everyone is talking about the decision of the Supreme Court of Florida in Shaun Olmstead v. Federal Trade Commission as if this were starling new law undermining the basics of LLC planning. In our view, it was an expected result which we have been taking into account in our planning in recent years. See our blog from last year: You Choose the Wrong State: LLC Mistake Number Two.

Two Types of Protection. With an LLC, there are two potential ways an LLC can protect you. First, if your LLC owns a rental property and the tenant files suit for an injury which occurred on the property and wins the suit, then there is a judgment entered against the LLC. Unless you personally caused the injury, then the judgment is against the LLC and not you and your assets outside the LLC should not be at risk. This general rule applies to both LLCs and Corporations. Second, if you have a car accident and you are sued and lose the case and a judgment is entered against you for $3,000,000 and your insurance only covers $1,000,000, then the judgment creditor will come after all of your assets for the remaining $2,000,000, including your ownership in an LLC. If the applicable state law does not limit the creditor to a charging order as the exclusive remedy, there was always a concern that the creditor could obtain the assets in the LLC through a court ordered sale and seizure of your LLC interests to pay the $2,000,000. A court can order a sale of your corporate shares because most state statutes for Corporations do not limit the creditor to a charging order as the exclusive remedy.

Charging Order. A charging order is where the judgment creditor gets an order from a judge that says that, for example, if Frank owns an interest in an LLC, anytime the LLC makes a distribution of profits, then the creditor gets Fred’s share of the profits and not Fred. If the charging order is the exclusive remedy, then the creditor is not supposed to be able to get a court order for the sale of Fred’s interest in the LLC.

Courts Want to Preserve Their Power. As the Court in Olmstead points out, courts for centuries have had the power to order the sheriff to seize any of your real estate, bank accounts and furniture and sell it at auction to pay a judgment against you. Courts hate to give up this power. A court will only give it up where the legislature has said in no uncertain terms that the court power to order a sale is prohibited for a particular asset.

Exclusive remedy. The Olmstead opinion is 45 pages long and two Florida Supreme Court Judges disagreed with the votes of the majority. To boil down all of the esoteric legal discussion, the Florida legislature failed to use the words “exclusive remedy” in the reference to a charging order in the LLC statute. Florida had amended its partnership acts to provide that charging orders were an exclusive remedy for partnerships but not the LLC statute. In the Olmstead opinion, there were strong and well reasoned opinions on both sides and it was not a foregone conclusion that the majority would require the exclusive remedy language. We expected it because our experience and view of the world is that people generally do not give up their power unless they are forced to do so.

Fears Confirmed. This is a major decision in that if confirms the fears of those that you have to have the words exclusive remedy in the LLC statute to set aside the age old power of the courts to sell everything you have.

Back to the Basics. This does not change the basics of increasing your asset protection by using LLCs, asset protection trusts, corporations, and offshore planning:

1. Take Action Now Before Disaster Strikes. Any asset protection can be set aside if you do it when you are in trouble. You have to be proactive and do asset protection before disaster strikes. With local, state and federal laws compounding in complexity and world change happening at a dizzy pace, you have to build your defenses now because the future is not predictable.

2. Do Good, not Bad. The federal courts found that Olmstead had operated an advance-fee credit card scam and was ordered to pay more than $10 million in restitution. If the courts find that you did something really bad, they will find any way they can to get you.

3. Choose the Right State. Establish your LLC in a state where the state statute clearly says that a charging order is the exclusive or sole remedy of a creditor and do everything you can to make that law apply in your state.

4. Avoid Single Member LLCs. In Olmstead, all of the LLCs were single member LLCs and the court said there was no block to a creditor taking over a single member LLC. There may be a block if there were two or more members. For an LLC with serious assets, use multiple member LLCs and restrictions on transfers of interests in your documents.

5. Make Distributions Discretionary. If there is a charging order entered, your manager should be able to deny making distributions so as to encourage a settlement.

6. Optional Buy Out. If a charging order is entered, provide in your operating agreement a way for other members to buy out the person who has a charging order entered against them for a discounted value.

7. Manager LLCs. Set up the manager position to retain control in case of bankruptcy.

8. Layers of Protection. An LLC is only the first layer of protection. For more protection, use partnerships or LLCs to own the interests in the operating LLC and an offshore or onshore asset protection trust to own the partnership interests.

Take Action Now. Call us to review your asset protection. We will review your entire situation and recommend changes. The above list is only some of the basics and not all of the steps you need to take now. We have a national network of advisors in every state and can work with you in any state. With the dangers of this economy, many who hung on until now are going under. Asset protection only works when it is done before disaster strikes. With all of the turmoil and change, you must take care of this now.

Private Social Service Safety Net, Finding the Immortal Trustee for the Special Needs Mentally Disabled Person

Private Social Service Safety Net. In our last blog, we discussed how the need for care for those loved ones with physical or mental disabilities is increasing while the federal and state programs for them are being cut or unable to keep up with growing demand and expenses. No one wants a loved one to be forced to live in an unsanitary and abusive institution. There remain many excellent governmental programs that are only available to those who do not have money. You can’t buy your way into many of the better programs. Instead, parents and planners for those with special needs should realize they will have to set up their own social service safety net for their loved ones. The first step is to recognize these dynamics and to establish a plan to take care of the disabled person using government benefits where available as a floor and their inheritance as a way to elevate their children’s quality of life.

A Special Needs Trust That Works. This type of special needs trust will be crafted to provide the specific treatment and the economic security for the special needs child or loved one. The focus is not on qualifying for government welfare benefits, but on designing a plan which will provide a safe and secure future for the special needs person. Where possible, there may be an attempt to qualify for governmental benefits, but whether governmental benefits are there or not, the special needs trust will provide for the disabled loved one.

People, Not Documents Are the Answer. Stephen Dale is a national expert on designing and drafting special needs trusts. Before becoming a lawyer, Dale had seventeen years of hands on experience as a psychiatric nurse taking care of persons with mental disabilities. He drafted the special needs language used by Wealth Counsel, the largest national organization of estate planners in the country with thousands of members and representation in every state. You should have the best documents. But, even though Dale is the guru of special needs trust documents, Dale’s experience is that even with the best documents, the documents will not come to life, jump off the table and protect your disabled child from abuse, neglect and lack of adequate care. In decades of hands on experience, Dale knows that the key is to find the right care giver advocate for your disabled child or loved one when you are no longer able to be the advocate of your child.

A Professional Care Manager. Most families assign the task of taking care of the disabled loved one to a spouse, sister or brother of the disabled person. In Dale’s experience, this is a usually a huge mistake. The family member is not an expert in this field, doesn’t know what resources are available, does not know which practices will improve or help the condition of the disabled person, does not have the time to spare from their own family and career and often will face care giver burn out. Ask yourself: Is this a fair and wise thing to impose on your child? Dale has seen people with disabilities have their conditions improve when their care is supervised by a professional care manager. Dale says a great source to find a care manager is http://www.caremanager.org/.

Role of the Family, Trustee and Care Manager. Dale recommends that the family serve as the Trust Advisory Committee which can supervise and replace the Trustee and Care Manager, direct distributions and amend the Trust to conform to changing laws where necessary. The Trustee will be a professional Trust Company which will use discretion in making distributions, understand and keep up with public benefit requirements, wisely invest the funds, conform to statutory fiduciary requirements, file taxes, do tax planning, keep perfect books, provide advocacy and be immortal, that is, stay in business longer than the lifetime of the disabled person. There are several national trust companies which have specialized divisions for disabled persons or extensive experience in this field. The Care Manager can supervise the distributions by the Trustee and the care of the disabled person. For additional information, go to http://www.achievingindependence.com/.

Separate Stand Alone Trust. Dale recommends in nearly all cases the creation of a special needs trust as a stand alone trust separate and apart from the estate planning living trust document of the parents. With a stand alone trust, grandparents, siblings and others have the opportunity to contribute funds to this trust. In our experience, stand alone trusts are much more readily accepted by banks, title companies and financial institutions. This facilitates the reduction of future estate taxes of the parents. Properly structured, the funds in the stand alone trust will be very hard to reach by a creditor of the parent or of the special needs child. In the separate trust document, the parent can decide who will receive the funds not used by the special needs child. A down side is that you have to determine whether the fully funded stand alone trust would restrict or deny present governmental benefits.

Change Your Special Needs Plan. If your plan for your special needs person is not set up in the way discussed in this blog or if you want your current plan revised or reviewed, contact us for a review and adoption of a better plan for your special needs child or person.