Chronic Illness and the Estate Plan


Martin M. Shenkman, Esq., (www.shenkmanlaw.com) focuses on the estate and business planning needs of high-net-worth individuals, closely held business  owners, and real estate owners/developers. We recently spoke to him about estate planning when a loved one has a chronic disease.

Q: What’s different about estate planning for someone with a chronic illness?

A: You need to focus on the specific disease, the individual’s experience with it, and its likely future course. There’s lots of variability.  Generic approaches don’t work; I can’t think of a worse candidate for online estate planning. The standard disability clauses that appear in most legal documents, even lawyer-prepared documents such as a shareholder’s agreement, should be examined. People make lots of dangerous assumptions—even professionals.

Q: Can you give me an example?

A: For instance, they may automatically structure an estate as if the person will be or has been unable to work.  Take MS–you can be diagnosed with it as a child but the average age is in the thirties. Someone with MS may be able to work for 10-20 years, some until retirement. Or look at Parkinson’s.  Most people experience its onset in their mid-sixties or later, but some begin to have symptoms in their thirties.  The older individual diagnosed with chronic illness may have had a full career during which to acquire assets. Planning is not only for the elderly and not only about special needs issues. Each situation requires a different approach.

Q:  What about advance directives?

A:  That’s another area that requires careful consideration.  Consider diseases such as MS and Crohn’s that involve uncontrolled attacks. A good way to approach power of attorney (POA)  in such cases might be to structure an immediate limited POA that would authorize someone to handle routine matters—bill paying—for a couple weeks.  But they wouldn’t be able to handle anything major, such as selling someone’s home.  The comprehensive POA would “spring” when the illness became incapacitating.

Q: You’ve said that estate planning tools should empower, not disempower.  What do you mean?

A: Disease disempowers. If you are living with a chronic illness or disability it limits what you can do. It disempowers you on some level or in some manner. There’s a big emotional component to planning for a loved one with a chronic illness, and there are creative means of preserving someone’s independence as much as possible. Take a situation in which an individual has bipolar disorder.  The person may be exceptionally bright and capable, but a manic episode could pose serious problems. The bulk of this person’s estate could be protected by establishing a fully funded living trust having family and institutional trustees.  But the trustees could be directed to establish a small account –say, $5,000–outside the trust that’s accessible to the individual by checkbook, credit and debit card. This would empower the person to do anything anyone else can do.  It could be replenished, as necessary, while the bulk of the estate would remain protected.

Estate planning tools should be used to ensure quality of life.  They shouldn’t be used as blunt instruments.

Thanks, Marty, these are thoughtful approaches to complex situations.  I hope they prompt readers whose loved ones have chronic illnesses to think creatively about their own estate planning.

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