HOBBIES ARE GOOD FOR YOUR HEALTH

Do you have a hobby? Hobbies can give meaning and purpose to your life in retirement. As Robert Putnam points out in his book, Bowling Alone, it’s easy to discount the importance of hobbies and social engagements. Putnam details the widespread decline in civic engagement, from PTA memberships to neighborhood potlucks and bowling leagues. Over a couple of generations, Americans have misplaced the concept of free time.

SPECIAL PLANS FOR YOUR SPECIAL PEOPLE

Lily is a beautiful, active and full of personality toddler who happens to have Down syndrome. Lily’s parents and I have been friends for years and I have the continuing pleasure of watching Lily and her siblings grow up. While Lily is becoming a physical therapy rock star and hitting all her milestones in a timely fashion, her parents have started planning for the future.

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WHY WE ENJOY OUR HOBBIES

The Merriam-Webster dictionary defines a hobby as “a pursuit outside one’s regular occupation, engaged in especially for relaxation.” Hobbies include anything from playing a musical instrument to gardening, bird watching or sewing. A hobby is a way of focusing on something you enjoy just for the sake of that enjoyment. It may also be a way to clear your mental palette. You could be stressed out by a situation at work or the challenges of raising children and need an escape.

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*. “Supplemental Needs Person” means a person who: is disabled or is receiving, or is eligible to receive, assistance or other benefits under a means based government program (such as Medicaid or Supplemental Security Income). “Disabled” is defined under USC Title 42, Section 1382c(a)(3), KAR Title 907 Chapter 20:005, or under any Kentucky law related to means based government programs. “Assistance” is defined in United States Code Title 42, Section 1396d(a), or under Kentucky law related to means based government programs, and in particular KRS 205.510.

The main way most American families save for the future is through private retirement savings plans such as 401(k)s and IRAs.  These plans offer the opportunity to designate a beneficiary upon the death of the account holder.  These designations allow the account assets to bypass probate and pass directly to the named beneficiaries. Often, individuals make these decisions when initially setting up the account and never reconsider them.


Typically, the account holder names a primary beneficiary and a contingent (or back-up) beneficiary.  The contingent beneficiary only receives the account assets if the primary beneficiary predeceases the account holder.  The account holder can generally name more than one person.  Some financial institutions will allow the account holder to name a class of beneficiaries, such as “my children.”   


However, for individuals who have children or loved-ones with special needs*, being the beneficiary of a retirement account could wreak havoc on their needs-based government benefits, such as Supplemental Security Income (SSI), Medicaid, or housing assistance. This is not simply a problem for large retirement accounts, many of the needs-based programs have very strict income and asset limits.  A Special Needs Person could lose access to these programs which provide medical coverage, housing, and other neces-sities if they inherit

PREVENTING BENEFICIARY DESIGNATIONS FROM WREAKING HAVOC ON SPECIAL NEEDS BENEFICIARIES

assets or income in their individual name.


Proper planning can prevent a Special Needs Person from losing their government benefits.  Creating a Special Needs Trust to receive the funds on behalf of the Special Needs Person will accomplish this goal. The account holder merely designates the trust as the beneficiary. If properly drafted, the trust can receive funds from a retirement account without negative income tax implications and the funds can be used to assist the beneficiary without compromising government benefits.  The purpose is to supplement the benefits.


A Special Needs Person may be provided for through designating their Special Needs Trust as the beneficiary of a 401(k) or an IRA account. There are also other ways to fund Special Needs Trusts, including designating the trust as a beneficiary of a life insurance policy and giving assets to the Special Needs Trust in a Last Will and Testament.


Routinely review your retirement account beneficiary designations and Estate Planning Documents, especially for the Special Needs Person in your life.       

AMY E. DOUGHERTY

Amy E. Dougherty has been with Bluegrass Elderlaw, PLLC since 2012. Amy focuses her practice on assisting older persons in qualifying for Medicaid long term care using Wills, Powers-of-Attorney, Advanced Directives, and Trusts.  She also advocates for clients before Social Security, Medicare, and Medic-aid agencies and defends against involuntary dismissal from long term care facilities. Previously, Amy practiced elder law for Legal Aid of the Bluegrass.

more articles by amy e. dougherty