Estate Planning for Disability


As Maryland estate planning lawyers, we often find that when people talk about estate planning, they usually think of a Will and what happens to their property after they pass away. However, death is not the only outcome you should be prepared for. A proper estate plan not only provides for distribution of assets upon death—it also plans for the possibility of disability and temporary or permanent incapacitation. If you are alive, yet unable to make decisions for yourself, your family may be unable to access your money to pay your bills without going through the process to get a guardianship over you.  Here are some important estate planning decisions to make to prepare for the unexpected.

Durable Financial Power of Attorney

You may be familiar with a power of attorney, and you might have had one written up for a specific purpose.  But was it “durable?” A durable power of attorney remains valid until you specifically revoke it. This document allows your chosen representative to act on your behalf in most financial matters, including management of your bank accounts, stocks, mutual funds or purchase and sale of your assets. They will be able to pay bills on your behalf or liquidate some of your assets to help pay for your treatment. This person doesn’t have to be a relative—you can generally grant a durable power of attorney to anyone you trust. Note that in Maryland a very specific form must be used in order for most banks to accept it—the form from another state or the one you found online may not be valid.

Health Care Power of Attorney with Advance Healthcare Directive

When you are putting together a backup plan in case of disability, you should definitely think about your healthcare. If you are in a hospital and unable to state your preferences for treatment or end-of-life decisions,  the doctors may do everything possible to keep you alive or may ask your family to make such decisions.  These decisions may not be what you would have wanted.

A Health Care Power of Attorney names someone you trust to make medical decisions for you if you can’t make them yourself.  The advance healthcare directive allows you to specify your exact wishes when it comes to life support, life sustaining treatments, pain medications, and organ and tissue donation.

Buy-Sell Agreements

If you own or co-own a business, you should plan for what may happen if you can no longer run that business. One of the options may be a buy-sell agreement with your co-owners. This agreement allows you and your partners to identify the terms and events that may trigger the sale of your interest in the business. These events typically include death and disability.

If you don’t have a buy-sell agreement with your partners, your family could end up in court trying to protect your interests. If you have one that was drafted a long time ago, maybe when you first started the business, you should review it to make sure it still says what you want. Does it specify how soon you have to sell if you become disabled? Does it make the distinction between short-term and long-term disability? Are you allowed to buy your interest back if you recover? If there is to be a sale, how would your interest be valued and how would the buyer pay for that? All of these are important questions to discuss with your Maryland business attorney.

Medicaid Planning

If you require nursing home care someday, you may wish to qualify for Medicaid or similar benefits.   There are restrictions on transferring your assets to others in order to qualify for Medicaid. There are many legal strategies you can use to protect your assets, however, the Medicaid rules contain many “traps” for the unwary. If you don’t utilize these strategies correctly, you may disqualify yourself from benefits for years.  An attorney who is familiar with the Medicaid rules and regulations can help you protect your assets without falling into one of these traps.

Special Needs Trusts and Inheritance

If you become disabled, you may end up qualifying for certain governmental benefits. However, you will need to maintain a certain low asset and income level in order to continue receiving these types of financial aid. If you inherit money from someone else, that money can then disqualify you from benefits until it is spent. One option is to set up a self-funded special needs trust, but after your death any money remaining in your special needs trust must go to Medicaid to reimburse them for the cost of your care instead of to your family. A person who plans ahead may be able to have that money left directly to a carefully written and administrated third party special needs trust. It’s worth talking to your estate planning attorney to discuss your options and come up with a plan.