People who have an estate plan have taken an important step in seeing that their wishes are carried out, both in disability matters and upon their death. They certainly earned the right to assume that their plan will, at a minimum, not make things more difficult for their family. Unfortunately, when you factor in the possibility of Public Benefits Planning, we often see plans that are either inadequate or outright obstructions to asset preservation. This usually is found in older estate plans, or ones done by non-attorneys or attorneys not familiar with elder law or special needs issues. The most common problems we see are lack of Medi-Cal and VA planning authority in trusts and powers of attorney, and "AB" trusts with mandatory funding formulas. These mandatory “AB” trusts are usually artifacts of old regulations regarding Federal Estate Tax that apply to almost no one anymore. The exemption from Federal Estate Tax these days is north of $5,000,000 for an individual, $10,000,000 for a couple. This doesn’t describe many of our clients. For the rest of us, instead of helping save money, these clauses can cost families time and administrative expenses, and a lack of flexibility for a surviving spouse. If public benefits planning is desirable, these clauses can thwart the use of beneficial planning techniques, and cost many thousands of dollars in lost benefits.
"AB" formulas can still be useful in certain "blended family" scenarios, or with non-mandatory formulas for very high asset families that might still need to be concerned about Federal Estate Taxes. Unfortunately, we frequently see trusts with these provisions without such reasons or need.
If you have an older estate plan, or a chronic health issue that makes Public Benefits Planning sensible, you might want to have your plan reviewed by a Certified Elder Law Attorney, or an attorney otherwise experienced with public benefits issues.