G.64 Planning for special needs and circumstances Flashcards
(20 cards)
Which of the following is a common estate planning tool used for families with special needs individuals?
A) Irrevocable life insurance trust
B) Special needs trust
C) Joint tenancy
D) Tenancy in common
Special needs trust
Explanation: A special needs trust is a legal arrangement that allows assets to be held for the benefit of a person with special needs without disqualifying them from government benefits.
What is the purpose of a letter of intent in special needs planning?
A) To specify how assets should be distributed upon death
B) To provide medical directives for a special needs individual
C) To provide instructions for the future care of a special needs individual
D) To name a guardian for a special needs individual
To provide instructions for the future care of a special needs individual
Explanation: A letter of intent is a non-legal document that provides information about the specific needs, preferences, and desires of a person with special needs.
Which of the following types of insurance may be appropriate for a special needs individual?
A) Whole life insurance
B) Term life insurance
C) Disability insurance
D) All of the above
All of the above
Explanation: Whole life insurance and term life insurance may be used to provide financial support for a special needs individual upon the death of the insured, while disability insurance can provide income replacement in the event that the special needs individual becomes unable to work.
What is the main purpose of a trust protector in a special needs trust?
A) To manage the assets of the trust
B) To make decisions regarding the special needs individual’s care
C) To ensure that the trustee is fulfilling their duties properly
D) To terminate the trust if it is no longer needed
To ensure that the trustee is fulfilling their duties properly
Explanation: A trust protector is a third-party individual or entity who is given the power to oversee and monitor the actions of the trustee of a special needs trust.
Which of the following may be used to provide for the care of a special needs individual after the death of their primary caregiver?
A) Guardianship
B) Conservatorship
C) Special needs trust
D) Joint tenancy
Special Needs Trust
Which of the following is an example of a government benefit that may be available to a special needs individual?
A) Medicaid
B) Social Security Disability Insurance
C) Supplemental Security Income
D) All of the above
All of the above
Explanation: Medicaid, Social Security Disability Insurance, and Supplemental Security Income are all government benefits that may be available to a special needs individual.
Which of the following is a potential risk associated with leaving assets to a special needs individual directly?
A) The assets may be used up quickly
B) The special needs individual may lose eligibility for government benefits
C) The special needs individual may not have the capacity to manage the assets
D) All of the above
All of the above
Explanation: Leaving assets to a special needs individual directly may lead to the assets being used up quickly, disqualification from government benefits, and the special needs individual not having the capacity to manage the assets.
Which of the following is a potential benefit of a pooled special needs trust?
A) Lower administrative costs
B) Increased control over assets
C) Ability to make direct distributions to the special needs individual
D) None of the above
Lower administrative costs
Explanation: A pooled special needs trust combines the assets of multiple individuals with special needs, which can result in lower administrative costs and fees than an individual special needs trust.
Which of the following is a potential disadvantage of a special needs trust?
A) Limited flexibility in managing assets
B) High administrative costs
C) Increased tax liability
D) None of the above
Limited flexibility in managing assets
Explanation: Special needs trusts are subject to strict rules regarding how the assets can be used, which can limit the flexibility of the trustee in managing the assets for the benefit of the special needs individual.
Which of the following may be considered in determining the appropriate amount of life insurance for a special needs individual?
A) The individual’s current income
B) The cost of ongoing medical care
C) The estimated cost of future care
D) All of the above
All of the above
Explanation: In determining the appropriate amount of life insurance for a special needs individual, factors such as the individual’s current income, ongoing medical care costs, and estimated future care costs should be considered.
John has a daughter with Down Syndrome who is currently receiving government benefits. He wants to provide for her financially after his death. Which of the following estate planning tools would be appropriate for John?
A) Joint tenancy
B) A will leaving assets to his daughter directly
C) A special needs trust
D) None of the above
A special needs trust
Explanation: A special needs trust would allow John to provide for his daughter without disqualifying her from government benefits.
Susan is the caregiver for her adult son who has autism. She wants to ensure that he will be taken care of after her death. Which of the following documents should Susan consider creating?
A) A letter of intent
B) A durable power of attorney
C) A living will
D) All of the above
A letter of intent
Explanation: A letter of intent would allow Susan to provide information about her son’s specific needs, preferences, and desires to help ensure that he is taken care of after her death.
Mark wants to provide for his special needs sister by leaving her a portion of his estate. What is a potential disadvantage of leaving assets to his sister directly?
A) She may not have the capacity to manage the assets
B) The assets may be used up quickly
C) She may lose eligibility for government benefits
D) All of the above
All of the above
Explanation: Leaving assets to a special needs individual directly can lead to potential disadvantages such as the special needs individual not having the capacity to manage the assets, the assets being used up quickly, and disqualification from government benefits.
Lisa is the trustee of a special needs trust for her brother who has cerebral palsy. What is the role of a trust protector in this situation?
A) To manage the assets of the trust
B) To make decisions regarding the brother’s care
C) To ensure that Lisa is fulfilling her duties properly
D) To terminate the trust if it is no longer needed
To ensure that Lisa is fulfilling her duties properly
Explanation: A trust protector is responsible for overseeing and monitoring the actions of the trustee to ensure that they are fulfilling their duties properly.
Tom wants to provide for his special needs daughter by purchasing life insurance. What is a potential benefit of using whole life insurance?
A) Lower premiums than term life insurance
B) Cash value accumulation
C) Greater flexibility in managing the policy
D) None of the above
Cash value accumulation
Explanation: Whole life insurance policies include a savings component that accumulates over time and can be accessed by the policyholder. This can be a potential benefit for special needs planning as it provides a source of funds that can be used to support the special needs individual.
Emily is a special needs individual who has received a large settlement in a personal injury case. Which of the following types of trusts might be appropriate for Emily?
A) First-party special needs trust
B) Third-party special needs trust
C) Pooled trust
D) All of the above
First-party special needs trust
Explanation: A first-party special needs trust would be appropriate for Emily as it would allow her to maintain eligibility for government benefits while still accessing the funds from the settlement.
David is the guardian of his special needs sister who receives government benefits. He wants to provide additional financial support to her without jeopardizing her eligibility for benefits. What type of trust might be appropriate for David to consider?
A) Revocable trust
B) Testamentary trust
C) Irrevocable trust
D) Living trust
Irrevocable trust
Explanation: An irrevocable trust would allow David to provide additional financial support to his sister without jeopardizing her eligibility for government benefits, as the assets in the trust would not be considered as belonging to her.
Sarah is the parent of a special needs child and wants to ensure that he is taken care of after her death. What is the purpose of a letter of intent in special needs planning?
A) To appoint a guardian for the child
B) To outline the child’s specific needs and preferences
C) To create a special needs trust
D) To designate beneficiaries for life insurance policies
To outline the child’s specific needs and preferences
Explanation: A letter of intent can be a valuable tool in special needs planning as it allows parents to provide detailed information about their child’s specific needs, preferences, and desires, which can be helpful for future caregivers and trustees.
Michael is the trustee of a special needs trust for his niece who has cerebral palsy. He wants to ensure that he is fulfilling his duties properly. What is a potential benefit of hiring a professional trustee?
A) Lower administrative costs
B) Increased flexibility in managing assets
C) Access to expertise and resources
D) None of the above
Access to expertise and resources.
Explanation: Hiring a professional trustee can provide access to expertise and resources that may not be available to individual trustees, which can be particularly valuable in special needs planning where there are complex rules and regulations to navigate.
Rachel is a special needs individual who has received an inheritance from her grandmother. What is a potential disadvantage of receiving an inheritance directly?
A) Loss of eligibility for government benefits
B) Inability to manage the assets effectively
C) Limited options for investing the assets
D) All of the above
All of the above
