Living Trust and Disability
A Living Trust is an estate plan that allows you to manage your assets during your lifetime and efficiently pass your estate to your chosen beneficiaries after your death. What if you acquire a disability?
What is Legal Disability?
“Person under legal disability” means a person 18 years or older who (a) because of mental deterioration or physical incapacity is not fully able to manage his or her person or estate, or (b) is a person with mental illness or is a person with developmental disabilities and who because of his or her mental illness or developmental disability is not fully able to manage his or her person or estate, or (c) because of gambling, idleness, debauchery or excessive use of intoxicants or drugs, so spends or wastes his or her estate as to expose himself or herself or his or her family to want or suffering.
(Source: P.A. 88-380.)
Like most statutes, it is easy to get lost in the details. Simply put, you can be declared legally disabled if someone petitions the court with the allegation that you are not fully able to manage your person or estate.
A person cannot be declared “disabled,” or incompetent, for questionable behavior alone. However, if that person is shown to lack the capacity to make sound decisions, a court can issue an order of legal disability and issue a guardianship.
Can it Happen to You?
Let’s be honest, if we live long enough, even if we do not suffer disabling injuries in an accident or from an illness, most of us will become physically or mentally unable to handle our affairs at some point late in life. However, if we leave ourselves open to the court system and all of its expense and uncertainty, we do so at our peril. In my career, I have seen estates completely lost and families torn about in guardianship proceedings. The system is open for abuse from greedy relatives and “friends.”
What is the Solution?
The solution is doing something in advance. Plan now. In the case of legal disability, one of the controlling factors is the court’s concern to preserve assets in your name as well as to protect your welfare. Do you want a court to be involved in your life? It is time to take steps to control your assets and choose what circumstances need to exist before you are considered disabled:
- Execute a Financial Power of Attorney while you have your capacity. Specify who your agent should be in the event of your incapacitation. Choose your doctor, not one who is court appointed, to determine your capacity.
- Execute a Health Care Power of Attorney and appoint a trusted person to make health care decisions on your behalf if you are unable to do so yourself.
- Remove your assets from the court’s guardianship control by transferring them into a Living Trust A Living Trust protects your assets from probate court at your death, and it also protects you during your lifetime in the event of a disability. Your successor trustee will manage your assets when you are unable. Your family doctor, not one court appointed, determines your capacity.
What if your Child becomes Disabled?
If one of your children or another beneficiary of your estate has a disability now, it is essential that you have an estate plan with Supplemental Needs instructions. What if they acquire a disability before your death by accident or illness? If you do not have a Living Trust that includes an SNT protection, your child will either lose their public benefits or what you leave them will go to the government for reimbursement of SSI and Medicaid.
Take steps now to ensure that if something happens to affect your capacity, or if one of your children/beneficiaries acquire a disability, your assets are not at risk and you are fully protected.
This blog entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts, as well as laws in specific jurisdictions. No reader of this blog should act or refrain from acting on the basis of any information included in, or accessible through, this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the reader’s state, country or other appropriate licensing jurisdiction.