You may have noticed the recent lawsuit between Aretha Franklin’s children to settle her estate, but did you catch the Special Needs Planning element?
Aretha Franklin wowed America and the world as the Queen of Soul, but Aretha did not wow us with her estate planning. She left two handwritten Wills, and the one a jury ruled valid was found stuffed between her couch cushions.
To settle a dispute over the two Wills, two of her sons went to court against a third, and while the two may have declared victory, it’s hard to feel that anyone truly won. An estate initially estimated to be valued at $80 million was whittled down to $4 million by the time the case was concluded, and while some funds were lost unnecessarily to taxes, a large portion was lost to the lawsuit itself.
But here’s the Special Needs Planning element you may have missed: A fourth son lives in assisted living under a court guardianship, and his guardian settled with the other three brothers out of court.
While Aretha’s huge estate will be able to support her son with special needs, most parents won’t have a multi-million dollar estate waiting for their children at their deaths. Most parents of children with special needs need to provide financially for their child while being careful not to disqualify them from much-needed government support programs like Medi-Cal and SSI. Making sure there is a financial plan for your child with special needs is essential in order to supplement the benefits that child can receive from government programs.
Balancing Support with Program Eligibility
The goal of Special Needs Planning is to provide continuous, consistent support for an individual with special needs across their lifetime. Aretha earned the money to provide care for her son without the need for careful planning, but most families need to maximize government benefits such as Supplemental Security Income (“SSI”) and Medi-Cal to care for a child with special needs and provide for the needs not met by government programs.
Parents who earn Social Security retirement benefits will be able to provide some of that benefit amount to their child with special needs when they pass away, and a child with a disability can work a limited amount, earn his own Social Security benefits, and eventually qualify for Medicare. Many individuals with special needs, however, receive services through Medi-Cal which Medicare will not provide such as job coaching, community integration, and day or residential services.
But even with these benefits, nobody can live on the maximum SSI payment of $914 per month, and Medi-Cal eligibility requires individuals to have under $2,000 in assets (with a few exceptions) to qualify. Because of this, parents of children with special needs must find a way to provide financially for their child while being careful not to disqualify their child from these government programs.
Careful Planning Preserves Your Assets for The Entire Family
To preserve your child’s eligibility for government benefits, the money you leave for the care of a child with special needs cannot go to that child directly. Instead, you must direct any gifts or inheritances into special planning vehicles such as a Special Needs Trust for your child’s benefit.
If you establish this trust during your lifetime, the assets can be used to supplement government benefits throughout your child’s life and any remaining funds are then passed on to other family members when the child with a disability passes away. But if the Special Needs Trust is set up after your death – in the absence of planning – any remaining funds in the trust must be used first to repay the state Medi-Cal agency that provided the child’s lifetime of care.
While Aretha’s son may end up with a Special Needs Trust established by a court, the rest of the family will never see those funds again because the Trust was established after Aretha’s death. By law, government programs are entitled to be paid back for the assistance they provide to people with disabilities out of that person’s leftover estate. At Aretha’s death, the inheritance she left her son became part of his estate, so it is now subject to pay-back collections for his government assistance when he dies.
If Aretha had created a Special Needs Trust while she was living, the funds in the Trust would still be considered part of Aretha’s estate, even after her death. Her son would have been provided for through this Trust but his brothers would then inherit the remaining funds when the son with disabilities passes away.
Applying these rules to the Franklin family has its limits. The son under a guardianship may be able to afford a lifetime of private pay – if the taxes and lawsuit did not diminish his share too greatly. But even Medi-Cal care rates for an individual with special needs can range from $50,000 to $350,000 per year – not an amount most families can afford.
This son may not have children of his own who would benefit from receiving any remaining funds after his lifetime, but many individuals with special needs have children for whom these funds could be meaningful. Likewise, siblings and other family members often devote countless unpaid hours to provide support for their loved one with special needs, sometimes at the expense of their own careers and families. Receiving some inheritance after years of caregiving can help alleviate the financial sacrifices these family members made.
Helping You Protect Your Child and Their Inheritance with Heart-Centered Guidance
It’s my mission to help your family live their best life today and plan for the best possible care for your loved ones tomorrow. Whether you have a child with special needs or an adult loved one who develops a disability ten years from now, I can help your family plan for these situations and more while keeping your family out of court and conflict and preserving family wealth.
While Aretha Franklin missed the opportunity to save her family millions of dollars by using Special Needs Planning tools, your own estate planning and Special Needs Planning can preserve your family’s wealth and ensure a lifetime of care for everyone you love.
To get started, schedule a free 15-minute call with me to learn more about my unique process and how I can help you and your child with special needs plan live your best lives.
Contact us today to get started.
This article is a service of Debbie Babb Law. We don’t just draft documents. We ensure you make informed and empowered decisions about life and death, for yourself and the people you love.
The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.