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Special Needs Trusts

Special Needs Trusts

A special needs trust, sometimes called a supplemental needs trust, holds assets for the benefit of a person, under the age of 65, who has been determined to be disabled by the Social Security Administration. These trusts shelter assets so that they are not considered when the person qualifies for need-based governmental benefits, such as Medicaid or Supplemental Security Income from the Social Security Administration. Assets held in a special needs trust are meant to supplement these government benefits. For instance, trust assets may be used for medical expenses above and beyond what is covered by government benefits, transportation and other necessary expenses. The assets are managed by a trustee, who usually pays trust assets directly to the providers of goods and services for the benefit of the disabled beneficiary.

Creating a Special Needs Trust

To leave a disabled loved one an inheritance, a parent or other family member will often create a special needs trust in his will. The will can simply state that if a beneficiary is deemed disabled at the time of the testator’s death, assets will go into a special needs trust This provision of the will names a trustee and lists the terms of the trust, the same as for a standard trust document. In this case, any inheritance is paid directly to the trust, and not to the disabled beneficiary.

Self-Settled Special Needs Trusts

If a disabled person receives an inheritance outright and he is under age 65, he can use the inherited funds to establish a self-settled special needs trust. It is called self-settled because the trust is funded with the disabled individual’s own money. The trust is still managed by a trustee, and the trustee can make direct payments to the providers of goods and services. Although created with the disabled person’s inheritance, the trust is established by a parent, grandparent, guardian or the court on that person’s behalf. A self-settled special need trust usually contains a pay-back provision to the effect that the state will be repaid for Medicaid costs expended for the beneficiary’s benefit upon his death.

Pooled Trusts

If a disabled person is over age 65, he may have the option to put his inheritance into a pooled trust. This is a trust managed by a non-profit organization for the benefit of a large group of people. Generally, there is no pay-back provision with this type of trust. Upon the beneficiary’s death, the money remains in the pooled trust for the benefit of the surviving members of the group. Medicaid laws change often, and, in some states, transfers to a pooled trust can affect Medicaid eligibility. Consult an estate panning attorney for the laws in your state.

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Do it yourself Divorce

At the heart of every divorce are four issues:

1. Division of community and/or marital property
2. Division of debt
3. Custody of any children
4. Payment of child and/or spousal support

While no divorce is truly “uncontested” in the sense that there are no disagreements, these disputes do not always have to be resolved in court. That’s what we mean by an uncontested divorce – one where the spouses can reach a decision as to the terms of the divorce without going to trial. Uncontested divorces move more quickly through the courts and are less expensive than contested divorces.

Every couple seeking a divorce should first attempt to work out mutual terms for the separation without going to court. If the spouses cannot resolve disputes on their own, many people utilize arbitration and mediation, with or without attorney representation. This saves time and money by bypassing the lengthy litigation and trial process. An uncontested divorce typically reduces hostility, allowing both parties to resume their lives more quickly.

Complex issues, high financial stakes and technical legal procedures are the marks of contested divorces. While an uncontested divorce can often be performed without an attorney, litigation often makes experienced counsel necessary for a contested divorce. If one spouse is represented by an attorney or there are difficult financial issues, seeking an attorney may be wise.

Under most state laws, a divorce (or “dissolution”) action must be filed and decided in court. All states have a “no-fault divorce” policy. In other words, the courts are not concerned with which spouse was guilty of marital misconduct.

The following legal requirements are necessary to file for divorce in most states:
1. Residency: The spouse filing for divorce must have resided in the state and county for a certain period. Six months is a common state requirement, and three months is typical at the county level.

2. Waiting Period: Most states have a mandatory waiting period from the filing to the finalization of a divorce. In other words, you cannot file and finalize a divorce on the same day. The average waiting period is 6 months but can be anywhere from 0 to 12 months. After the waiting period, the divorce is finalized and both parties are free to remarry.

3. Legal Grounds: States generally recognize two legal grounds for divorce: (1) irreconcilable differences and (2) separation. “Irreconcilable differences” simply means there are marital difficulties that cannot be reconciled and have led to the permanent breakdown of the marriage.

4. Jurisdictional Requirement: An action for divorce must be filed with the proper court. The appropriate court is typically in the county where either the wife or husband has resided for at least 3-6 months prior to filing for divorce.

A divorce starts with a divorce petition. The petition is written by one spouse (the petitioner) and served on the other spouse. The petition is then filed in a state court in the county where one of the spouses resides. It does not matter where the marriage occurred. The petition includes important information regarding the marriage. It names the husband, wife and any children and states if there is any separate property or community property, child custody, and child or spousal support.

Serving the Divorce Petition

The petition (or the divorce papers) must be served on the other spouse. This phase of the process is called “service of process.” If both spouses agree to the divorce, the other spouse only needs to sign an acknowledgement of the receipt of service. However, if the other spouse refuses to sign or is difficult to locate, you can hire a professional process server to personally deliver the papers.

Completing service of process starts the clock running on your state’s waiting period. It also sets automatic restraining orders on the spouses and helps establish the date of separation. At this point, the spouses are not permitted to take any children out of state, sell any property, borrow against property, or borrow or sell insurance held for the other spouse.

Divorce Petition Response

The other spouse is known as the “respondent.” Although it’s not required, the respondent can file a response to the petition saying he or she agrees. Filing a response shows both parties agree to the divorce. This makes it more likely the case will proceed without a court hearing, which could delay the process and cost more. Generally, if a response is not filed within 30 days, the petitioner can request that a default be entered by the court. The responding spouse can also use the response to disagree with information presented in the petition.

Final Steps of a Divorce

Both spouses are required to disclose information regarding their assets, liabilities, income and expenses. If the divorce is uncontested and the spouses can agree on the terms of the divorce, there is only a bit more paperwork to file. Once the court enters the judgment, the divorce is final. However, the marriage is not formally dissolved and the spouses cannot remarry until the end of the state’s waiting period. If there are disputes that cannot be resolved, court hearings and maybe even a trial will be required.

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Prenuptial Agreements

Most state laws regarding the distribution of property after death or in the event of divorce leave plenty of room for a judge’ s interpretation. Therefore, you can never be sure what a judge will decide is really your property after a marriage. The only way to possibly avoid this is with  pre-nuptial agreements.

The need to have  pre-nuptial agreements often does not become apparent until there is a divorce or a death, which is when problems you never thought of tend to emerge. Divorce is more common than most want to believe. Some statistics suggest the divorce rate is even higher in second marriages than in first marriages. Do not forget that prenuptial agreements can be useful in the event of death, which is a subject even fewer people seem comfortable thinking about.

Most people think that  pre-nuptial agreements are what rich people use to protect their property in the event of divorce from their less wealthy spouse. Actually, there are many more reasons to use a pre-nuptial agreement.

First Marriages

Even if you and your partner are a young couple with no significant property and typical jobs, and this is the first marriage for both of you, there is some evidence to indicate that pre-nuptial agreements actually promote stability in a marriage. This is because preparing one gives you a chance to carefully think about the significance of marriage, to clearly understand each other’s financial situation, and to consider how you see your financial futures (individually and together). Discussing a pre-nuptial agreement, even if one is never finalized, will make you realize that by getting married, you are entering into a legally binding contract with financial rights and obligations. This side of marriage is usually totally overshadowed by the romantic and religious aspects, and by the ceremony and honeymoon planning.

Many spouses do not know any of the details of the other’s finances. Since one of the requirements of a prenuptial agreement is fully disclosing each party’s financial situation, preparing one will help the couple get a clearer understanding of their total financial health. This can be very helpful in making financial decisions.

It is also good for a couple to share common dreams and goals. Focusing on a prenuptial agreement can help the couple discuss their career and economic goals in life. Especially with the common two-career couple, it is important to share thoughts on where each person intends his or her career to head. If each person is intent on developing his or her career, it might be a good idea for the couple to sign a prenuptial agreement giving up rights in each other’s income or business (especially if they have a fairly equivalent earning potential and they are just starting out in their careers). On the other hand, if they are in business together, a prenuptial agreement could outline how the business will be divided in the event of divorce. This document could avoid expensive attorneys’ fees later, and prevent a fight over the business in the divorce proceeding.

Children of Prior Marriages

One of the main circumstances for a pre-nuptial agreement is when one or both of the parties have children from a prior marriage or relationship. In such cases, a prenuptial agreement may be the one way to assure that the children are protected in the event of divorce or death. Otherwise, all of your property may go to your second spouse, with your children getting nothing.

Example: Rob and Rita are married and have no children together, but Rob has two adult children from his former marriage. If Rob dies without leaving a will, under the laws of their state, all of Rob’s property goes to Rita. Rob’s children will receive nothing.

A pre-nuptial agreement can help assure that children from a prior marriage will be provided for as intended by their parent. Your future spouse should have no objection to you wanting to take care of your children.

Business or Investment Partners

If you have business partners, you should have a prenuptial agreement to prevent disruption of the business in the event of divorce or death. Otherwise, you or your partners may end up with your spouse as a business partner, and that can cause all kinds of problems.

This caution also applies if the business is a privately held corporation. Many problems have occurred when a spouse inherits stock as part of a divorce judgment.

Example: Mark and his brother Jim each hold 50% of the stock in a small restaurant business started by their father. Mark married Jane, and several years later Mark died, leaving Jane his half of the stock. Jane was then the business partner of her brother-in-law. Jane then married Fred. When she and Fred divorced two years later, she gave Fred the stock in the restaurant as part of the property settlement. Now Jim has Fred for a partner. Is this what Mark would have wanted? Is this what Mark and Jim’s father intended to happen to his family business?

Suppose Mark and Jane had divorced. A judge might have divided the stock between them. Now Jim would have 50%, and Mark and Jane would each have 25% percent. Now Mark has his ex-wife as a business partner.

Deciding on a Pre-nuptial Agreement

Your state government has created a plan for how your property will be divided in the event of divorce or death. Ask yourself if you are satisfied with the state’s plan or if you want your own plan. Think about all of the laws your state legislature has passed. Then, ask yourself if you like any plan the legislature came up with on any subject.

Most state laws regarding the distribution of property after death or in the event of divorce leave plenty of room for a judge’ s interpretation. Therefore, you can never be sure what a judge will decide is really your property after a marriage. The only way to possibly avoid this is with a prenuptial agreement.

The need to have a pre-nuptial agreement often does not become apparent until there is a divorce or a death, which is when problems you never thought of tend to emerge. Divorce is more common than most want to believe. Some statistics suggest the divorce rate is even higher in second marriages than in first marriages. Do not forget that prenuptial agreements can be useful in the event of death, which is a subject even fewer people seem comfortable thinking about.

Most people think that a pre-nuptial agreement is what rich people use to protect their property in the event of divorce from their less wealthy spouse. Actually, there are many more reasons to use a prenuptial agreement.

A pre-nuptial agreement is entered into before marriage. This agreement can set forth what will happen to your and your spouse’s assets and income in the unfortunate event of divorce, separation or death. Most importantly, a prenuptial agreement can preserve the nature of property in the event the marriage ends. In other words, separate property can remain separate, instead of being subject to community property or equitable distribution laws.
Pre-nuptial agreements are gaining in popularity for a variety of reasons. One reason is that people today are focusing on their careers and delaying marriage. By the time they do marry, both partners have property and financial worth to protect. Prenuptial agreements make this easy to do. Pre-nuptial agreements are also common when one partner has children from a former marriage. Such an agreement makes sure a spouse’s separate property goes to their own children.

The greatest problem in most divorces is deciding how to divide property and money. Many prenuptial agreements are entered into simply because couples do not want the courts to decide on asset distribution should the marriage end. A few minutes of upfront planning have the potential to save headaches and tremendous financial hardships in the long run.

Whatever the reason, we can help you create a personalized prenuptial agreement. Simply answer a few questions online from the comfort of your home, and we will assemble the necessary documents for you.

Benefits of Pre-nuptial Agreements

The benefits of  pre-nuptial agreements cannot be overstated. Although many divorces do not end up in court, they can still be extremely costly. Most people overlook the fact that marriage is a communion of property.

Deciding who receives what property can be a painstaking process requiring a lot of time and money. Lawyers can charge an average of $200 an hour to solve these problems for you. The minimal time investment of a prenuptial now can save you the potential cost and hassle of a difficult divorce later.

Pre-nuptial agreements primarily deal with couples who want to keep property separate and avoid court distribution in the event of divorce. Any kind of property can be included in the agreement, such as homes, automobiles, stocks, checking accounts, business interests and personal belongings. Debts can also be categorized as separate property. This prevents one spouse from being liable for the debts of the other should the marriage dissolve.

Validity of Pre-nuptial Agreements

The courts typically uphold pre-nuptial agreements unless one person shows:

  1. The agreement is likely to promote divorce
  2. The agreement was written and signed with the intention of divorcing
  3. One party was forced into signing
  4. The agreement was created unfairly

In addition, all pre-nuptial agreements should be based on the full disclosure of assets and debts by both parties. If you do not fully disclose your financial position, the prenuptial will be vulnerable in court. In addition, while you do not need an attorney to create a prenuptial agreement, it may be a good idea to retain one if the other spouse does so.

To understand what a pre-nuptial agreement can do, it is important to understand community and separate property. Community property is observed in the following states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. All other states follow equitable distribution laws.

In a community property state, the husband and wife equally own all income and assets earned or acquired during the marriage. This means the husband and wife equally own all money earned by either one of them during the marriage, even if only one spouse works. In addition, all property gained during the marriage with “community” money is deemed to be owned equally by both the wife and husband, regardless of who purchased it.

In a community property state, all debts contracted from the beginning of the marriage until the date of separation are community debts. This means both spouses are equally liable for these debts. In most cases, this includes unpaid balances on credit cards, home mortgages and car loan balances.

In equitable distribution states, property acquired during the marriage belongs to the spouse who earned it. In a divorce, the property will be divided between the spouses in a fair and equitable manner. There is no set rule for determining who receives what or how much, but a variety of factors are considered. For example, the court may look to the relative earnings contribution of the spouses, the value of one spouse staying at home or raising the children, and the earning potential of each. Often, each spouse will receive one-third to two-thirds of the marital property.

Regardless of your state’s property division laws, a prenuptial agreement lets you decide how marital property will be divided in the event of a divorce. For example, a prenuptial agreement can state that income earned during the marriage will belong to the spouse who earned it. In this sense, a prenuptial agreement can “override” community property or equitable distribution laws.

Separate Property in  Pre-nuptial Agreements

The rules of community property and equitable distribution only apply to income and assets earned or acquired during the marriage. Separate property is everything a husband and wife own separately. In most cases, separate property includes:

  1. Anything owned prior to the marriage
  2. Anything inherited or received as a gift during the marriage
  3. Anything either spouse earned after the date of separation

In the event of a divorce, separate property will not be divided.

Similar to separate property, separate debts belong to one spouse. All debts incurred before marriage are separate debts. Educational or job training loans acquired before marriage are examples of separate debts.

One of the main benefits of  pre-nuptial agreements is that separate property can be prevented from being accidentally re-classified as joint property. This can happen when funds are co-mingled or payments are made out of joint funds. For instance, if one spouse owes a large student loan, both may agree to keep that loan as a separate debt. Then, only one spouse would be liable for the debt in case of divorce.

No state allows limitations on child support payment amounts in a prenuptial agreement. Child support payments are defined by state guidelines.
On the other hand, spousal support waivers vary from state to state. States which follow the Uniform Pre-Marital Agreement Act permit the waiver of spousal support. However, the laws on this topic are constantly changing. For example, the California Supreme Court ruled that these types of waivers are enforceable. The state legislature amended the statutes to require legal counsel for spouses who plan to sign a waiver.

In general, a blanket waiver is acceptable in many states. Specific spousal support agreements (for instance, that a spouse will receive $2,000 per month in the event of divorce) are more problematic and can be difficult to uphold.

A pre-nuptial agreement is a contract between two persons planning to marry that determines the rights they have to each other’s property. You may also see them called antenuptial agreements, or pre-marital agreements. Prenuptial agreements are used to control how property will be divided in the event of divorce or the death of one of the spouses.

Most people do not fully appreciate the legal rights and obligations that are created when they marry. The legal aspects are often overlooked until it comes time for divorce. Then they find out that marriage is easy to get into, but difficult to get out of. The death of a spouse can also cause various problems with the couple’s property.

When you get married, the law gives you and your spouse certain rights in each other’s property. This includes property you acquire during your marriage, and may include property you acquired before you got married. The law also has provisions for how this property is handled in the event of divorce or death.

A pre-nuptial agreement might be considered a will for the death of a marriage (either due to actual death or to divorce). Just as a will can be used to avoid some of the hassles of probate, a prenuptial agreement can be used to avoid some of the hassles of divorce (and probate). Actually, everyone already has a will and a prenuptial agreement through the law. These are the probate and divorce laws, which can be viewed as the will and prenuptial agreement the state writes for you if you do not write your own. The divorce laws and the probate laws of your state give guidelines for the judge to follow in determining how property should be divided or distributed. By using a prenuptial agreement, you and your spouse can write your own guidelines to be used instead of your state’s laws.

For a long time, many courts would not enforce pre-nuptial agreements. The law has traditionally favored marriage. In the minds of lawmakers and judges, a prenuptial agreement seemed to encourage divorce, so the lawmakers would not approve them and the judges would not enforce them. However, with the simplified divorce procedures and high divorce rate in more modern times, lawmakers and judges finally came to accept reality. Every state’s laws now allow for prenuptial agreements.

Some people even include non-financial rights and responsibilities, as specific as who takes out the garbage and who does the dishes. However, since these types of agreements will not usually be enforced by the courts, they are better left out of the prenuptial agreement. If desired, these types of provisions should be part of a separate agreement that is just used to remind the husband and wife of their rights and responsibilities when disagreements arise.