YES, YOU DO NEED TO PLAN : THREE SCENARIOS

Below are three scenarios: same modest assets and the same family dynamic. The only difference is the planning.

Scenario: Barbara, 55, is the mother and primary caregiver of her son, Matthew, 28, who lives with her. Matthew has autism and other comorbid conditions including epilepsy and gastrointestinal issues. Barbara owns a modest home, has a small IRA and social security, and together with her son's part-time income and SSI, is able to make ends meet. Barbara spends her days driving Matthew to and from his job and various therapies, preparing meals, helping with daily hygiene, and managing medications. Matthew is partially verbal, receives Medicaid benefits, and, when not working, has learned to take the bus to an adult day program.

Barbara feels alone, stressed, and has missed her last two doctors’ appointments. As a results of her untreated hypertension, she suffers a fatal heart attack.

OUTCOME 1: NO PLAN

Despite Matthew's future being Barbara's biggest concern, she doesn't know how to create a plan, or where to start. Like 2/3 of Americans, no estate or care planning has been done to protect Matthew's future. Upon Barbara's demise, Matthew inherits $25,000 which he cannot manage or properly utilize. Not only can he not live safely on his own, but he cannot afford the home without his mother's contribution. His inheritance makes him ineligible for Medicaid benefits, which terminate 30 days after his mother's passing. The home he has always lived in needs to be sold to settle the estate.

He is soon to be homeless, uninsured, no longer has transportation to his job, and cannot participate in his day programs or therapy because of his lost benefits. Without his mother to monitor his medications, he has a seizure and is taken to the emergency room where a social worker is brought in to evaluate his circumstances. Since Matthew is uninsured, he receives a $25,000 hospital bill, wiping out his inheritance. If someone helps him find his social security card and birth certificate and assists in completing the applications, he can now reapply for benefits. Hopefully, he can find a safe living situation for the next six months while his applications are reviewed.

OUTCOME 2: OUTCOME 3: INCOMPLETE/POOR PLANNING

Barbara creates a trust with her local attorney. In this trust, Barbara names her nephew, David, as Matthew's trustee. When Barbara passes, David learns of his appointment as trustee and scrambles to try to find appropriate housing for Matthew. However, David finds that there is a waiting list at many homes. He decides that Matthew can live with him while they wait for a housing option to open up. Barbara's IRA, which hadn't been updated in years, named her husband (deceased) then her children as beneficiaries.

IRAs (and other qualified plans) are not governed by wills, but by the beneficiary designations. The incomplete planning means that while Barbara's home and other assets were included in the trust, the IRA is still distributed to Matthew. David will need to go to court, with the hope of setting up a 1st party special needs trust to hold the IRA assets. There are now 2 trusts with different regulations to manage — and the meaningful legal expenses of setting up a trust and going to court.

David has a hard time understanding government benefits regulations and managing the two trusts. With the best of intentions, he makes a distribution that triggers a loss of benefits. Matthew is told that he should consider suing David, but he doesn't know if he should, nor does he have any desire to sue his cousin, who was only trying to help — leaving him with little recourse. David, in addition to his continued housing search, is now looking for a benefits expert to help him appeal the Medicaid decision and reapply for benefits.

OUTCOME 3: PROPER PLANNING

Barbara and Matthew create a comprehensive estate and care plan that includes all of Matthew's daily living needs, medications, schedules, housing goals, and a supplemental needs trust. Working with their care coordinator, appropriate supports are determined, and a plan for Matthew's life after Barbara's passing is put in place. With the added supports, and improved mental and physical health, Barbara doesn't miss her doctors' appointments.

When Barbara eventually passes, $25,000 and the balance of her IRA are deposited into a supplemental needs trust for Matthew’s benefit. Barbara’s financial advisor put a small 20-year term life insurance policy in place. At 55 years old, she paid $100/month and got $500,000 in benefit, which funded Matthew’s special needs trust. All of Matthew’s benefits remain in place, since the trust does not count as a Medicaid asset. Matthew moves into the group home that he and his mother previously selected, and the trust provides furnishings. Since Barbara had a care plan that she had been continuously maintaining, the group home receives a comprehensive medical history, medications list, and list of all programs and therapies that are part of Matthew’s life. Matthew emails his trustee from time to time when he needs something — a new tv, an XBOX, or tickets to a baseball game. Most of Matthew’s needs are provided for by the group home and his government benefits, which are protected by his expert corporate trustee. Additional therapies and activities are paid for by his trust. David, as trust protector, visits his cousin once a month and makes sure that all is well, but doesn’t have any daily responsibility or fiduciary liability. The trust is paying for David and Matthew to go to Disney World together next month, a dream that Barbara included in Matthew’s care plan.

Matthew misses his mother, but is safe and secure and has new-found friends and robust support services in the residence he and his mother selected.