Wealth Preservation and Preventive Law Alert Number 11
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Not Having Contingent Special Needs Trust Provisions Disqualifies a Disabled Loved One
This Preventive Law Alert was written by: John Goodson, Colleen Manley and Christine Goodson Forakis.
These Preventive Law Alerts are patterned after an annual publication to all mountain climbers called “Accidents in North American Mountaineering” which writes up all mountaineering accidents describing the accident, what caused it, how it may have been prevented so that further mountain climbing catastrophes may be avoided. The Preventive Law Alerts are the equivalent of “Legal Accidents in North American Law” – a description of the legal catastrophe and how it may be avoided using preventive law techniques.
The Legal Catastrophe
Unfortunately, there may come a day when a family member may endure a sudden disease or an accident that leaves them permanently disabled. Not thinking that this may happen to their family, certain generous, loving grandparents provided in their revocable trust that distributions will be made upon their deaths to grandchildren as designated distributions, or “Gifts on Death.”
After they passed away, John and Deborah’s grandson Jimmy was injured in a tragic car accident which left him paralyzed from the waist down. His disability would have made him eligible for government care and Social Security payments; however, because his grandparent’s trust distributed assets to him on their death, he was disqualified from receiving these benefits.
The Preventive Law Solution
With new government programs designed to take care of disabled persons, every trust must now be amended or set up to provide that distributions intended for all family members be curtailed where a beneficiary is disabled, and instead diverted to a Third Party Special Needs Trust so as not to disqualify the disabled heir from government assistance. The assets in this Third Party Special Needs Trust allow the disabled person to receive government aid for support and medical care as well as distributions from the Third Party Special Needs Trust to supplement the extra requirements of the disabled family member not provided by the government aid. When the special needs person dies, whatever is left in the trust may be given to other persons named by the creator of the trust.
Whenever legal documents are prepared we must use Preventive Law thinking and discuss the “what if” situations like the possible need for a contingent Special Needs Trust as to ensure that such provisions are placed or amended into all of your trusts. We will discuss more legal accidents in trusts in some of the future Preventive Law alerts.
Important Action Step 1
Arrange for all of your trusts to be reviewed by an attorney familiar with Special Needs Trusts in order to ensure that you have covered the “what ifs” for any beneficiaries who may someday require special needs protection of their intended distributions. Email John Goodson, jgoodson@gmdlaw.com to discuss how to prevent this legal accident from ever occurring with one of your trusts.
Important Action Step 2
Email jgoodson@gmdlaw.com or call John Goodson (602 252-5110) with the names and email addresses of (1) family members, (2) friends, (3) colleagues, (4) business associates and personnel, (5) organizations/clubs, (6) customers or clients, (7) parents in your schools, or (8) anyone else who you think cares about this topic that you want to receive our Preventive Law Alerts. We will send the previous alerts and include your referrals on our email list to receive future alerts as they are published.
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