June 23, 2024
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June 23, 2024
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Linking Northern and Central NJ, Bronx, Manhattan, Westchester and CT

With the Jewish New Year season comes the reading of the book of Genesis. As we read through the ancient stories of the Patriarchs, I am always struck by how contentious the family dynamics were. As a professional financial planner, I sometimes wonder how different world history would have been if the Patriarchs had just done some solid estate planning.

Let me give you an example. In our practice, we work with many families that have special needs children. A few years back, I attended a lecture where the presenter suggested that the story of Jacob and Esau and the selling of the birthright would look very different if we understood that Esau was a special needs child—that he had attention deficit hyperactivity disorder (ADHD).  Nowadays, you can’t make such a claim without some solid evidence. Here is what the speaker offered.

Esau was a hunter and a “man of the field” (Genesis 25:27). No quiet shepherd work for him. He needed action and a place to channel his hyperactivity.  Esau comes in from the field overcome with hunger and trades his birthright to his brother Jacob for a bowl of stew. The need for instant gratification, no connection between action and consequences and, he had forgotten his lunch. Finally, Isaac‘s instructions to Esau. “Please take your gear, your quiver and your bow, go out into the field and hunt me some game” (Genesis 27:3). It seems like a fairly detailed set of instructions to be giving a professional hunter.

I wasn’t sure about this last part until my wife pointed out the difference between the morning routine of our son, who is diagnosed ADHD, versus that of our daughter, who is not. As my daughter leaves for the school bus, I shout out: “Have a good day; make good choices; I love you.” When my son leaves, I have a checklist: “did you take your meds? Did you take your homework? Do you have your lunch? Are you wearing two socks? I love you.” OK, I am convinced. Esau had ADHD!

In the end, Jacob fled his home fearing deadly retribution from his brother for usurping the birthright. He returned decades later, still living with the guilt and apprehension, unable to build a trusting and harmonious relationship with his twin brother.

Now if Isaac were our client, there is no way we would have let him plan his estate the way he did, which caused strife and disharmony between his children. He favored one over the other and created an environment of jealousy and competition.  Ultimately, he left the estate in the hands of a child who did not value the assets and was unable to be the executor.

If Isaac had been our client, we would have drafted a personalized financial plan that accommodated his special needs family, and contained six key tenants—commandments if you will.

1. Create a written financial plan. The objective of a financial plan is to help you identify your financial goals and then prioritize them. A good plan lays out each of your financial needs and lets you look at them all together. That way, you can allocate your resources to where they are most needed.  If you deal with needs one at a time as they arise, it’s a pretty good bet that the last ones won’t get sufficiently funded, no matter how important they are.

For individuals and families, the cost of failing to plan can be a lousy retirement, inadequate funding for your children’s college, undignified long-term care services; perhaps no legacy for your children. However, if you fail to provide sufficiently for your special needs child or children, you potentially condemn them to be wards of the State.

2. Create a Will and other Estate documents. Estate documents are a key part of your financial plan. They act as instructions for distribution of your wealth, appoint agents (fiduciaries) to administer the process and tack care of your minor children, and resolve your debts and taxes.

At a minimum, they should include a Last Will & Testament, Power of Attorney, Health Care directives, and perhaps a Trust. These provide for an orderly transition of your affairs if you are incapacitated or when you die. And let’s face it, you will!

3. Choose your fiduciaries wisely. Your fiduciary team includes the Executor, the Trustee and the Guardian of any minor or non-independent children. They will be the heroes of your legacy—so choose them wisely. Each fiduciary role has different duties in settling your affairs and requires different skills. They are often the same person but do not have to be and it may be advisable or necessary for different people to take on each role.

Briefly, the Executor executes your Will. They clean up after you, distribute your assets to the heirs and trusts, and pay your outstanding bills and taxes. The Trustee manages and distributes any assets left to any trust, such as assets for minor or disabled children. The Guardian raises your children if you can’t.

Choosing a Guardian to be responsible for your children until they reach the age of majority is often a difficult planning decision, especially for families with special needs children.  While this decision can be terrifying, the best thing to do is work through these fears and make a decision. For families with special needs children, the Guardian is taking on a commitment that may last your child’s entire life. Wills are changeable; and fiduciaries can be replaced at any time prior to your death, so your choice is not irrevocable.

4. Create a Special Needs Trust. A trust is a legal (fictional) person that can act for the benefit of a real person when they are too young or not sufficiently capable to act for themselves. It’s a simple, flexible and vitally important concept, especially in the world of special needs planning.

Under the law, every disabled child is entitled to special education services (Individual with Disabilities Education Improvement Act of 2004), usually until age 21. After that, their entitlement ends. While Federal and State governments provide a large array of services for disabled adults, many are need-based.  For example, to qualify for Supplemental Security Income (SSI), an individual’s savings and assets cannot exceed $2,000 (or $3,000 if married).

To avoid disqualifying your special needs child from government services, you must exclude them as heirs to any of your estate and create a special needs trust which receives the assets on their behalf. This trust is administered by a Trustee who is instructed as to what he or she can provide to the disabled individual without disqualifying them from government services.

5. Fund your trust. A trust is a legal shell capable of holding assets. But it is up to you to fill it with money. If you don’t have sufficient wealth to fund your trust to provide for your special needs child when you die, life insurance is often the best solution. The death benefits from life insurance can provide your child with the necessary coverage. It closes the gap between what assets you may have and the funds needed to fully provide for your child’s needs. (This will be discussed in more detail in our fourth article.)

6. Create a Letter of Intent—Share your love. When you die, your secrets die with you. Things like your secret password to your bank accounts and emails, important contact information, and the locations of your investments and assets. We encourage our clients to create a secure (open upon death) memorandum with all of their private information. We call it a “Love Letter”—as in, “I love you so much that I am providing you with all the information you need to settle my affairs so you don’t go crazy and end up hating me for not sharing my secrets with you.”

For families with special needs, we supplement the “Love Letter” with additional information about the special needs member. This is called a Letter of Intent. It includes details about that person’s daily routine, his/her medical information and important contacts such as doctors, social workers and friends. It also includes information about their likes and dislikes, hobbies, etc. The Letter of Intent creates continuity in the life of the special needs person at a time when his or her life is severely disrupted.

The Jewish New Year traditionally is a time when we acknowledge the frailty and fleetingness of life. Perhaps we should ask ourselves, how ready are we if we are not sealed in the Book of Life next year?

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Zev Grossman and Bruce Maier are registered representatives who offer securities through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC, investment advisor representatives who offer investment advisory products and services offered through AXA Advisors, LLC, an investment advisor registered with the SEC, and agents who offer annuity and insurance products offered through AXA Network, LLC.  AXA Advisors and its affiliates and associates do not provide tax, accounting or legal advice or services.  Please contact your tax and legal advisors regarding your particular circumstances. AGE-89835(11/13)(exp.11/15)

By Zev Grossman and Bruce Maier

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