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Part 2 – Conversions: Estate Planning for the Unknown or Unexpected

“To expect the unexpected shows a thoroughly modern intellect.”

Oscar Wilde

As you think of your loved ones and your estate plan, you may be thinking – “Mine is not that complicated. I don’t have any unknown factors. I don’t have millions in assets so why should I be concerned.  I will leave everything to my loved ones and there is enough to help them and their grandchildren.”  While this is true for many people, there is one aspect of estate planning that is often not considered and that is “The Unknown” or “The Unexpected.”  Unfortunately, there are a couple of unknowns or unexpected events that could vastly impact your loved ones and their inheritance.  Planning for these involves “Conversions” which we wrote about in our last blog.

Why are Conversions Important?

Unknown Addiction

As we discussed in our last blog talking about the Pain Pill Epidemic, when you set up your Estate Plan, you may not know the situation of your loved one. Those you name as your Beneficiaries. Those you leave your assets to. Often addictions, including pain pill addictions, are not visible to the outside world. You may not know that your adult child may be addicted. Their siblings, their spouse, or their friends may know, but as their parent or loved you one may not.

In the “Customized Protective Estate Plan Solution™”, we spend a lot of time with our clients asking many questions about the strengths and weakness of each of their loved ones, often their children. We ask about their loved ones, to try and see if the client knows of an addiction. Sometimes there is knowledge of the addiction, or the parent may not know at all.

Addiction Conversion

In the “Customized Protective Estate Plan™” Trust, we build in “Conversions” as we discussed in the last blog . In the event an adult child has become addicted to something such as pain pills, the Trustee can require that your loved one, your named beneficiary, show that they has successfully completed rehabilitation before the inheritance, or a portion of the inheritance, is given to them. As discussed last time, addicts can often hurt themselves by an overdose if there an influx of money such as an inheritance.

Therefore we build in “Conversions” for what may be unseen, or has happened after the client sets up their Estate Plan. We never know what life holds but we can try and build in some “Conversions”. Unfortunately, pain pill addiction is a sweeping epidemic in our country. We do build in a “Conversion” to help with that.

There are other types of Conversions to address changing or unknown circumstances that could impact the inheritance.

What if your Loved One become Disabled?

Disability Conversion

If someone is disabled they may be receiving government benefits. This maybe to help with nursing home costs or other extraordinary care expenses due to a disability or injury.

In the event a loved one suffers a catastrophic injury, or illness that leaves them debilitated, they may now have extraordinary care expenses. This could be from a head injury from an automobile accident or a sudden stroke, or a sudden illness. If your loved one is left in a position where they require constant care, such as skilled care nursing, Medicaid may come in to pick up that expense.

What if the Disabled Loved One receives an Inheritance?

If your loved one has qualified for Medicaid due to disability, you do not want to knock them off of their government benefits, nor do you want to preclude them from receiving government benefits. You have paid for that government benefit by paying your taxes over the decades. Those taxes are paid to help be a safety net in the event you or your loved one end up in a catastrophic position.

If there is an influx of money, such as an inheritance, it may knock your loved one off of their government benefit. Then the inheritance might need to be “spent down” to $2,000.00, or so, before your loved one can reapply to get back on Medicaid. Also, the government can have “Estate Recovery” where they take any asset that you left by inheritance to your loved one after your loved one dies.

What if you know your Loved One is Disabled?

If you know your loved one is disabled ahead of time, you do “Special Needs” aka “Supplemental Needs” planning in your Estate Plan. They are both terms that are a recognized way for providing additional care through their inheritance, for your loved one without disqualifying your loved one from Government benefits, including Medicaid.

What if the Disability happens after you set up your Estate Plan?

If your loved one becomes disabled after the Estate Plan is in place, we have a “Conversion” in our Trusts that allow the inheritance to “Convert” to “Special Needs “ aka “Supplemental Needs” planning. Therefore, the inheritance does not knock your loved one off of the needed Medicaid or preclude them from obtaining the needed Medicaid or Government benefits.

Conversions for the Unknown

We never know what the future holds, but we do build two important “Conversions” into our “Customized Protective Estate Plan™” Trusts. Therefore if your Beneficiary becomes addicted after the Estate Plan is in place or becomes disabled to the point of needing government benefits after the Estate Plan is in place, the Trust converts their share of their inheritance to give it to them in a protective manner so that it benefits your loved one, as opposed to hurting them.

At the Law Firm of Steven Andrew Jackson, Attorney and Counsellor at Law, we have helped hundreds  of families protect themselves and their loved ones, avoid Estate Taxes and Probate Costs, and keep their Estate Plans current with the law through The Customized Protective Estate Planning Solution™.