FAQ: Estate Planning

What is Estate Planning?

Estate Planning provides for the planned distribution of your assets upon your death.  By planning ahead, your estate can reduce the impact of federal taxes on your estate leaving a larger pool of money for distribution to your family or intended beneficiaries.  An estate plan is your chance to benefit the people or organizations that are most important in your life. While estate planning is important for everyone, it is crucial for families that have relatives with disabilities.


What is a Will?

A will is a written document with instructions for disposing of assets after death.  A will can only be enforced through the probate court. A properly designed will should include the designation of an Executor, arrangements for payment of your funeral expenses, what assets you have and who should be entitled to receive those assets.


What responsibilities would my Executor have?

Executors of estates are tasked with responsibilities such as paying funeral expenses, administering legal issues surrounding the estate, distributing gifts in accordance with the provisions of your Will, and maintaining the property of the estate, such as safeguarding valuables, caring for the lawn or pets, and paying utility and other bills, during the administration of the estate.


What is a Power of Attorney (POA)?

A power of attorney is a document that gives a person, typically called the agent, power to make decisions on behalf of the person creating the power.  There are two types of powers of attorney: a regular power of attorney and a durable power of attorney.

A regular POA can be implemented giving the power designated as the agent the power to make decisions for the person creating the power of attorney.  The decisions are usually financially related and involve either direct power to make cash decisions or the power to make a financial decision that is not cash related such as a real estate transaction or car signing.  This type of POA becomes ineffective if the person who grants the powers becomes incapacitated.

A durable POA remains in effect even if the person granting the power becomes mentally incapacitated.  In such case, the person who becomes mentally incapacitated will usually grant the agent the power to make financial and medical decisions.  The medical decisions granted may include limited medical procedures. The durable POA ends when the principal dies.


What is a Living Will?

A living will is a legal document to make known your wishes regarding life prolonging medical treatments in the event you become incapacitated and are either in a terminal condition or permanent state of unconsciousness.  It can also be referred to as an advance directive, health care directive or a physician's directive. It is important to have a living will as it informs your health care providers and your family about your desires for medical treatment in the event you are not able to speak for yourself.


What is a trust?

A trust is a multifunctional instrument used for several purposes.  In general, a trust is a right of property, real or personal, held by one person for the benefit of another.  A trust authorizes a named Trustee to manage the trust property for the benefit of one or more individuals or beneficiaries.  


What is a special needs trust?

A special needs trust is an instrument created to protect the assets of someone who is disabled and is or will be receiving public assistance.  Special Needs Trusts are designed to permit financial resources to remain available to assist a disabled individual who receives, or may receive in the future, MH/MR and/or Medical Assistance and/or SSI benefits.  They also protect such resources from immediate invasion by the Department of Public Welfare (or other providers of publicly-funded services) to reimburse the public treasury for the provision of MH/MR, MA or SSI benefits.  


Does a Special Needs Trust qualify my disabled relative for public benefits?

No. A special needs trust does not itself make public benefits available.  Nor does it make it easier to qualify for them. The beneficiary must qualify for the benefits program – either before or after the Trust is established.  If properly designed, the Trust will not cause a loss of benefits.


Can a Special Needs Trust also benefit my typical children?

Depends on the type of special needs trust.  A third party funded trust can be set up to benefit non-disabled relatives.  A special needs trust funded by assets of the disabled relative through a settlement can only benefit the disabled relative and allows the Department of Public Welfare to retain a lien against the trust once the disabled relative dies.   


Why would I want to place money in a Special Needs Trust just to qualify for government benefits?

Many benefits are extremely expensive and financially draining when paid for privately. This can place a burden on families with limited resources.  


Who should be in charge of the Trust?

The combination of a family member and a professional (or corporate) trustee is often the best arrangement for administering the Trust.  Your disabled relative cannot serve as trustee. The corporate trustee must be sensitive to the needs of the beneficiary and must be knowledgeable about government benefits and the administration of Special Needs Trusts.  


What does the Trust pay for?

A Special Needs Trust can provide for physical therapy, medications and medical treatment and transportation.  It also may allow for other life-enhancing items, such as education, entertainment, vacations, companionship, furniture and furnishings (such as a television or computer), and some utilities (e.g., cable television and telephone service, but not electricity, gas or water).  The general rule is that a Trust may not provide the beneficiary with food, clothing or shelter (e.g., rent), or any asset which could be converted into food clothing or shelter – including cash. If the Trust is structured to pay for food, clothing or shelter, the disabled person’s SSI payments will be reduced.  However, with proper Trust administration, the basic benefit as well as Medicaid eligibility can be preserved. Distributions of cash to the beneficiary are almost never permitted.