The planet that we inhabit seems to grow more chaotic with the passing of time. Our reality is a dangerous one, with global pandemics like the coronavirus outbreak recording exponential death rates, and tragic domestic and international terrorist attacks happening on an all to frequent basis.
The only certainty in life is that some day our lives will end. We like to avoid dwelling on such unpleasant thoughts, but that does not make it any less true.
Another uncomfortable truth is that we often do not sense when death is upon us. We may deceive ourselves into thinking that we will die when we’re old and it’s our time. It’s easy to believe that, when the time comes, you will have had ample opportunity to make arrangements so that your loved ones benefit from what you leave behind.
Nothing can change the fact that death comes without warning for many of us. Sudden cardiac death causes about 325,000 adult deaths in the United States each year, and it occurs most frequently in adults in their mid-30s to mid-40s, according to recent data by the Cleveland Clinic. Unintentional injury claims 160,000 lives per year, and is the leading cause of death for people under the age of 44, according to CDC numbers.
Even though we are bombarded by news and images of things that will claim our lives, few of us have a plan for when the day comes. In fact, according a survey by the AARP, 6 in 10 U.S. adults have not done a will!
Intestate Probate
If you do not plan for death, the state where you live determines how your assets are distributed. It is a one-size-fits all plan defined by laws of intestate probate, and for many people in this situation, the outcome usually isn’t anything like what they would want.
For example, Don, 42, died suddenly without a Will. He is survived by a spouse Jeanie, and two children, Billy and Suzy. In his state, his spouse receives half of his assets, and with the other half is divided evenly between Billy and Suzy, his children. Because Billy is a minor, his share would require a guardianship to hold his inheritance until he turns 18. Don’s daughter, Suzy, is an adult child with special needs. She is receiving needs based government assistance due to her disability. The receipt of an unprotected inheritance through intestacy will cause her to lose that government assistance. The solution to this problem is the creation of a first party special needs trust for Suzy. Unfortunately, this will involve an additional court proceeding besides the probate that is already required. And if there are any funds left when Suzy dies, those funds would first have to be used to pay back the state for any Medicaid (Medi-Cal in California) benefits that Suzy received during her lifetime.
Make a Plan to Avoid Intestate Probate
With proper planning, Don and Jeanie could have avoided this situation. They could have met with an estate planning attorney who could have drafted a joint trust for them that would have held 100% of the assets for the surviving spouse after the death of the first spouse. Upon the death of the surviving spouse, whatever was left could have been split into a trust for each child. The trust for Billy could provide for Billy’s care and be used to pay for his college education. When Billy reached age 25, or any other age Don and Jeanie would specify, the remaining funds would be released to Billy.
Suzy’s share would be paid to a third-party special needs trust. The third party special needs trust would be managed by a designated person who Don and Jeanie trusted and the funds would be used to pay for Suzy’s needs that weren’t being provided for by the government assistance. Because the trust was a third party special needs trust and not a first party special needs trust, there would be no requirement to payback the state for any Medicaid (Medi-Cal) benefits that Suzy received throughout her lifetime.
Take care during these uncertain times. Tomorrow is not a guarantee for any of us. Take advantage of the time you do have to make a plan that fits your wishes and address the needs of your beneficiaries.
Contact Riverside Trust Attorneys
If you have additional questions or concerns about how to protect your loved ones in your estate plan, contact the experienced Riverside estate planning and elder law attorneys at Sandoval Legacy Group by calling (951) 787-7711 to schedule an appointment.
Have a question? Ask Dennis.
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