A question frequently asked by the parents of older, disabled individuals is how they can best provide for their offspring after their own deaths. This is a question faced by all parents, but it assumes special importance for parents with a child who is unlikely ever to be independent. If you have a disabled child, consult with an experienced Bountiful Utah family lawyer to know how you can best provide for your child after your death.
What happens to your property after your death
Under Utah law, if you have a will, your property will be distributed according to your instructions given in the will A court, called the probate court, is the agency that insures that this is done. The probate court first determines if the will is valid, and then takes steps to put it into effect. This is called probating the will, and the gifts that are made through the will are called bequests.
What happens to your property if you die without a will or, as lawyers say, if you die intestate? Your estate is then disposed of according to a formula set down in a statute enacted by the state legislature. If you have a spouse and children, your spouse typically gets a specific portion, usually one-half or one-third, and the children get the remainder of all of your real and personal property. If you have no spouse but only children, they typically receive all of your property.
When property passes to children in this manner, it is divided equally among all of the children, whether or not they need it, and whether or not they are competent and able to manage it. Thus, many parents, but especially parents of a child with disabilities, might wish some different form of distribution. These parents should have a will. An experienced Bountiful Utah family lawyer can help you prepare your will.
Creating a Will
In a will, parents can provide for the distribution they wish, and also can do other things. They can suggest to the probate court the name of someone they think would be a good guardian, or limited guardian, or conservator, for their child, if they think such a person will be needed to assist the child after their death. Only the court can appoint a guardian, but a parent’s nomination will be given very strong consideration by the court and, in most cases, will be accepted. In a will, the parents of a person with mental retardation can also express other preferences, relating to, for example, the individual’s care, training, living arrangement, or religious practices.
In every will the testator should also name the executor of the estate. The testator is the person who makes the will; the executor is the person who is responsible for the collection and distribution of the assets of the estate in accordance with the terms of the will. The executor need not be an attorney. In most cases, a family member or close friend is named as executor. She can hire an attorney, using funds from the estate, if one is needed to carry out the terms of the will.
Through their will, parents can divide up their property however they think best, perhaps giving a larger share to the most needy child, who may be the one with a disability. There are several significant problems with this approach, however: (1) The disabled son or daughter may not have the capacity to manage property left to him outright. (2) Property left outright to disabled people will be counted as their assets and thus may make them ineligible for certain government benefits in which eligibility is based on need. (3) With the additional assets counted as their own, disabled people receiving government services may be subject to charges for care. Thus, in many ways, leaving substantial assets directly to a person with mental retardation who would otherwise be eligible for government benefits is very much like making a contribution to the government–something that some parents might wish to do, but many others would not. So speak to an experienced Bountiful Utah family lawyer to know your options.
Leaving No Money
What alternatives do parents have if their offspring will lose benefits if she has an inheritance? They might disinherit their disabled child. This approach of leaving no money directly to the child has advantages: the parents’ assets can be left to their other children, who might put them to good use, whereas, if left directly to the disabled child, they might have been dissipated rapidly.
Disinheritance, however, also has disadvantages: if at some future time after the parents’ death, government programs are eliminated or benefits reduced or discontinued, the retarded child may be in great need of the resources the parents could have left him. But then it will be too late. For parents, it can be an extremely difficult decision to disinherit a child. Even when they believe it is rationally the best thing to do, the act often produces strong feelings of guilt. However, you should give serious thoughts to disinheritance if your estate is very small. If you are seriously considering disinheritance, speak to an experienced Bountiful Utah family lawyer.
Morally Obligated Gift
Another alternative to leaving property directly to a person with mental retardation is leaving what is called a “morally obligated gift” to someone else, such as a brother, sister, cousin, or friend of the individual who is mentally retarded. At the time of gifting you make a request to that person to use the gift exclusively for the benefit of your disabled child.
The principal advantage of such a gift is its simplicity. It also has significant disadvantages, however, which arise from the fact that the recipient becomes the owner of the property. If the property draws interest or otherwise generates income, the recipient is liable for any taxes due. Also, the recipient’s creditors might be able to take the property in any number of ways–in a divorce settlement, for example, or if the recipient suffers business reversals, or has any other uninsured liability.
Furthermore, a morally obligated gift imposes only a moral obligation on the recipient to use it for the person with mental retardation, not a legal obligation. If times become difficult, the recipient may experience an irresistible temptation to use the gift for her own family. Conversely, if the inheritance is exhausted, the recipient may feel obligated to use her own assets to continue supplying assistance to the retarded individual. This may impose a significant hardship on the recipient’s own family; it can cause a result that the testator would never intend.
Finally, if the recipient of a morally obligated gift dies before the person who is mentally retarded, the gift will be considered as part of the recipient’s estate. It will be distributed according to the intestate law (if there is no will) or in accordance with the will of the recipient. Speak to an experienced Bountiful Utah family lawyer if you are considering a morally obligated gift.
Joint Property and Life Insurance
Another option open to parents is the creation of jointly owned property. The parents may decide to make their adult child with mental retardation, during their lifetime, a joint owner of some of their property, subject to a right of survivorship. Then, if they die, their child (the survivor) automatically becomes the sole owner of that property. This approach has the same effect as if that portion of their estate had passed to the child through a will and is subject to the same disadvantages, including possible incapacity to manage, ineligibility for benefits, and charges for care. Nevertheless, parents should consider the possible usefulness of a small joint bank account, possibly of the type requiring two signatures for withdrawals, in teaching their son or daughter money management skills.
Life insurance is one more option parents should consider in planning their estate. Life insurance is a contract made with the insurance company and is not affected by the parents’ will unless the beneficiary of the policy is the parents’ estate. Making the estate the beneficiary has the disadvantage of possibly increasing the cost of probating the estate, as well as possible undesirable tax consequences. Naming the child with a disability as beneficiary, however, creates the same problems as a direct bequest, and naming another individual as beneficiary, with a request that the funds be used for the benefit of the person with mental retardation, entails the same disadvantages as a morally obligated gift.
Another solution is for parents to name, as the beneficiary of the insurance policy, a trust for the disabled child. Trusts can avoid many of the disadvantages of the various approaches considered so far.A trust is a legal relationship created by one person, called the “settlor,” in which another individual, the “trustee,” owns and manages property for the benefit of a third person, the “beneficiary.” In the situation we have been considering, the settlor will usually be a parent, the beneficiary will be the person with mental retardation, and the trustee might be a brother or sister of the person with mental retardation, or perhaps a cousin or close family friend. The trustee should not ordinarily be much older than the retarded person, because the hope is that the trustee will live to manage the trust funds up until the death of the beneficiary. (A successor trustee should be appointed to assume the role if the first trustee should die during the life of the trust.) Because the trustee owns the trust property, lawyers say that she has legal title, but because the trustee must use the property only for the benefit of the beneficiary, the beneficiary is said to have “equitable title” to the property.
A trust is created by a document called a “trust instrument.” If properly worded, a trust instrument establishes a relationship with the following advantages:
• The beneficiary is not considered the owner of the trust property. Thus, his eligibility for government programs based on means is not endangered, and the trust assets cannot be taken by the government as payment for services rendered.
• The trust funds can be used by the trustee to buy goods and services for the beneficiary, to pay bills on behalf of the beneficiary, to give spending money to the beneficiary, etc.
• The trustee has great flexibility in managing the trust assets. He can use them to buy and sell stocks, bonds, property (in some states, the trustee must obtain authorization from the probate court before selling any real estate), or other investments; the trustee can deposit trust funds in a bank account or can withdraw them; the trustee can tailor the payments she makes to or for the retarded individual to suit that individual’s needs as they change over time (i.e., as the individual with mental retardation grows more or less disabled, or as government programs change). If the trust is very large, the trustee can use trust funds to hire financial experts to manage it. The trustee can hire an attorney if one is needed.
A trust is an extremely flexible mechanism that overcomes most of the disadvantages of the other estate-planning approaches.
Trusts may be established in the settlors’ (parents’) will and take effect upon the parents’ death. This is called a testamentary trust; the will specifies what portion of the parents’ estate is being left to the trust. Or, the trust may take effect during the parents’ lifetime; this is called an inter vivos trust. The parents can make gifts of real or personal property to the trust while they are still alive. They can also suggest that others, such as aunts, uncles, and grandparents who might be inclined to make gifts to the person with mental retardation, do so by having the assets go to the trust rather than directly to the individual. The relatives can do this either by a gift during their lifetime or through a bequest made in their wills.
Bountiful Utah Family Lawyer Free Consultation
When you need legal help from a family lawyer in Bountiful Utah, please call Ascent Law LLC (801) 676-5506 for your free consultation. We can help you with divorce, child custody, child support, annulment, adoptions, and more. We will help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506