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In the state of Arizona, ARS Title 14<\/a> governs trusts, estates, and protective proceedings.<\/p>\n Estate planning can be a lot like going to the dentist\u2014you know you need to do it, it\u2019s on your to-do list, but you push it off as long as possible. Unfortunately, putting off estate planning has significantly greater consequences than skipping the dentist. The risk is even greater for parents with disabled children, as you\u2019re not just talking about organizing your assets, but providing a plan to care for your disable child in your absence.<\/p>\n The good news is that estate planning doesn\u2019t have to be that difficult. Here are 10 simple steps you can take to implement an estate plan that includes care for a disabled child:<\/p>\n The estate planning process becomes much easier when you\u2019re well-organized. Start by gathering important documents and writing down essential information that you and your attorney can use as a reference as you craft your estate plan. Focus on the following, for you, your disabled child, and (if applicable) your spouse:<\/p>\n As you\u2019re collecting documents and information, designate a file cabinet or bin where you can store everything, and let a loved one know where this cache of documents is. When you pass away, it\u2019ll be extremely beneficial for your family to have all of your important documents and information in one place.<\/p>\n An experienced estate planning attorney\u2014especially one who specializes in special-needs, disability, Medicare\/Medicaid, or SSI planning\u2014can make a complicated process much simpler. When you find an attorney who you feel comfortable working with, meet for a consultation to discuss your needs and your goals.<\/p>\n You\u2019ll likely discuss what kind of care and assets your disabled child will require, how they qualify for government benefits now and in the future, who you would like to serve as guardian for your child, and if you have other children or heirs whom you\u2019d like to gift assets to when you pass away.<\/p>\n As you sketch out your estate plan with your attorney, be sure that the assets you leave to your disabled child don\u2019t disqualify them for government benefit programs. Programs such as SSI, Medicare, and Medicaid are designed to cover most (if not all) essential medical costs for disabled individuals, but the programs have strict income requirements that will disqualify your child if they have access to too much money. Instead of gifting assets to them directly, your attorney will probably recommend you establish a special needs trust for their benefit (discussed later).<\/p>\n If an accident or illness renders you incapacitated, you\u2019ll need an authorized agent to handle your affairs and care for your disabled child. Drafting a durable power of attorney<\/a> will authorize one of your family members, friends, or advisors to handle your finances, and nominating a successor guardian would ensure someone has the legal authority to care for your disabled child, speak with their doctors, and make important decisions on you and your child\u2019s behalf.<\/p>\n On a similar note, you\u2019ll want to draft a living will to outline your preferences for medical treatment. If you are incapacitated and unable to communicate important medical decisions, your healthcare providers can reference your living will (also known as an advance healthcare directive<\/a>) to understand your preferences regarding important treatments such as palliative care, resuscitation, and artificial life support.<\/p>\n It\u2019s also helpful to designate someone to serve as your healthcare proxy who can speak with your doctors and access your medical history. Usually this is the same person who you\u2019ve authorized to be your agent with the power of attorney, and you can add medical authorization in the power of attorney document.<\/p>\n To avoid confusion and unnecessary stress for your surviving loved ones, write down your funeral and burial plans in a non-binding letter of intent. You can include this information in your will, but it\u2019s wise to leave the letter of intent with a loved one in case your family doesn\u2019t open your will until after the funeral. Be sure to include any pre-need services you\u2019ve already paid for (such as with a cemetery or crematorium), and which\u00a0 (if any) of your assets should be used to pay for other necessary services.<\/p>\n For parents of a disabled child, this step is critical. A standard will-appointed guardian<\/a> can care for your child as a minor, but you\u2019ll need a court-appointed guardianship or conservatorship to care for them once they reach adulthood. Most parents in this situation will establish the guardianship with themselves as the initial guardians, and they\u2019ll appoint a successor guardian to take over when they die.<\/p>\n A special needs trust<\/a> is the most popular option in estate planning for disabled children. Thanks to its special designation, a special needs trust can provide lifetime income for a disabled child without impacting their eligibility for SSI, Medicare, and Medicaid. A special needs trust accomplishes this by giving full control of the assets in trust to a third-party trustee, who controls both the amount of income payments the disabled child receives, and the frequency of income payments.<\/p>\n As long as the beneficiary\u2019s guardian doesn\u2019t use the income for primary care that SSI, Medicare, and Medicaid are supposed to pay for, the child will retain full eligibility for government benefits. The trust income can then be used for luxuries such as a nicer care facility, advanced\/optional treatments, food, travel, etc.<\/p>\n You can establish a special needs trust during your lifetime (called a living trust), or you can order one be formed after your death (called a testamentary trust). If your estate is at risk for estate taxes, or if you have considerable assets subject to probate, it may be advisable to fund a living trust during your lifetime.<\/p>\n For the purpose of estate planning, certain assets are designed to automatically transfer to your heirs when you die, while other assets can only transfer to beneficiaries through probate court. Considering how probate can be a long, expensive process, it\u2019s usually best to avoid it as much as possible.<\/p>\n The following assets naturally pass to your heirs through contracted beneficiary designations:<\/p>\n For those assets, all you need to do is ensure the right people are listed as beneficiaries in the account paperwork. If you find any of the accounts need updated beneficiaries, there is usually a simple form you can submit to the financial institution to change the beneficiary designations.<\/p>\n When considering how to transfer of your retirement assets, keep in mind that transferring a 401k or IRA to a special needs trust will result in the trust having to pay income and capital gains taxes on the gifted assets. Depending on the size of the account, that could be a considerable charge.<\/p>\n However, if you gift retirement assets to an individual, you can avoid capital gains taxes. Because of this, many estate planning professionals advise gifting retirement assets to individuals other than your disabled child (such as other children or relatives), and funding the special needs trust with other assets, such as life insurance proceeds, bank accounts, or brokerage accounts.<\/p>\n1.\u00a0\u00a0\u00a0\u00a0\u00a0 Gather Important Documents and Information<\/h2>\n
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2. \u00a0Meet with an Attorney to Plan for Your Needs<\/h2>\n
3. \u00a0Prepare for Incapacity<\/h2>\n
4. \u00a0Prepare for End-of-Life Healthcare Needs<\/h2>\n
5. \u00a0Formalize Your Funeral Plans<\/h2>\n
6. \u00a0Establish a Guardianship or Conservatorship<\/h2>\n
7. \u00a0Special Needs Trust<\/h2>\n
8. \u00a0Direct Your Non-Probate Assets<\/h2>\n
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9. \u00a0Direct Your Probate Assets<\/h2>\n