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Special Needs and Circumstances in Estate Planning

Posted by attorney Thomas Begley

Special Needs and Circumstances When drafting a will, an attorney must recognize that individuals have different backgrounds. In an initial client interview, an attorney must determine whether the special needs or circumstances exist. These needs and circumstances include, but are not limited to:

(1) Disabled beneficiaries – Outright bequests to disabled beneficiaries may disqualify them from government benefits which they are receiving and may be mismanaged in the event the disability is mental. However, a special needs trust can be established to protect a bequest for a disabled beneficiary while maintaining his or her government benefits. This trust may be testamentary or it can be established as a stand-alone document. (2) Spendthrifts – Occasionally, families have a child who has significant financial problems. This definition can vary from a child who merely lives paycheck to paycheck to one who is beset with judgments or bankruptcy. Individuals with mild problems can have their distributions staggered, but more serious cases warrant the use of a spendthrift trust. A spendthrift trust can provide support for a spendthrift. However, the trust assets will not be subject either to the claim of creditors or the poor habits of the spendthrift child. (3) Second marriages – This issue arises far too often. In the case of a second marriage, where both spouses have children from a prior marriage, simple wills are ill-advised. If one spouse leaves the entire estate to the survivor, then the surviving spouse frequently will distribute most, if not all of the combined estate to his or her own children, leaving little or no assets for the family of the spouse who died first. A distribution in a trust, such as a Q-Tip Trust, can ensure that a surviving spouse will have economic protection yet allow for any remaining principal and interest to be distributed among the decedent’s family. (4) Non-citizen spouses – non-citizen spouses do not qualify for the unlimited marital deduction. In order to accommodate the competing needs of such a spouse, who would like access to the decedent’s assets, and the Internal Revenue Service, which would like to tax any assets of a decedent in excess of the applicable exemption amount, a Q-DOT trust may be established to provide for access to funds by a non-citizen spouse until their death so long as there is an independent trustee and location of trust assets within the United States.

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