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Estate Planning and Mental Illness: Things to Consider

Did you know that 1 in 5 adults in the United States experience a mental illness? Understanding this fact will not only help us remove the stigma surrounding mental health, but will also make people feel more comfortable reaching out for the help they need.

As you probably know, estate planning can be a sensitive subject. It can be even more sensitive when the issue of mental health is involved. Odds are, you or someone in your family is living with a mental health condition. Rather than pretending it doesn’t exist, you can choose to be proactive and set up an estate plan that addresses these mental health challenges head-on.

Understand you’re not alone if you suffer from mental illness

America is dealing with a mental health crisis, and that’s not an exaggeration. According to the National Alliance on Mental Illness, approximately 20% of US adults experience mental illnesses (nearly 50 million people).

It’s no surprise that the mental health crisis has gotten worse during the coronavirus pandemic. Mental Health America has reported that loneliness and isolation are fueling increases in anxiety, depression, and thoughts of suicide and self-harm. Despite many seeking mental health treatment, many Americans are still not receiving the services they need.

Where do we go from here? Well, the first step is acknowledging there is a problem. Reaching out to a healthcare professional will get the ball rolling on treatment options. And of course, it will also be important to create an estate plan that takes into account your own, or a family member’s, mental health.

Your mental health and your estate plan

Every estate plan should be tailored to your individual needs and your unique family dynamics. There are several estate planning documents available that can address concerns around your mental health. For example, there may come a point when you’re unable to manage your own affairs. To prepare for such a situation like this, consider having the following documents in place:

Financial power of attorney. This is a document that will allow you to choose somebody else to manage your finances on your behalf. For example, they can manage your bank accounts, pay bills, or sign papers at a real estate closing for you.

Medical power of attorney. A medical power of attorney allows you to choose the person who will make decisions about your medical care when you no longer can. You will be able to limit the kinds of decisions your chosen representative can make.

Revocable living trust. A revocable living trust contains money and property that you transfer into it, and you choose a person (the trustee) to manage it for your benefit while you are still alive. You can set up a living trust in such a way that it can be changed or revoked except when you do not have the mental ability to do so or have passed away. A living trust can also specify the distribution of the money and property when you die.

Keep in mind that in order for these documents to have legal authority, you must have the mental capacity to sign them. You may want to seek out a professional opinion from a licensed mental health provider stating that you have the mental capacity to understand the meaning and effect of the documents you’re signing. Alleging lack of capacity is a common basis for contesting an estate plan.

Additionally, if you’re entrusting somebody with power of attorney authority that has their own mental health concerns, you should discuss the issue with your family as well as your estate planning lawyer.

Your beneficiaries’ mental health

An additional challenge you may face is when you have beneficiaries who suffer from mental illness. It’s important to be careful about passing your legacy to them in a way that serves their best interests. Two ways you can look out for a loved one who is mentally ill is through discretionary trusts and supplemental needs trusts.

Discretionary trusts. With a discretionary trust, you choose a trustee who determines how to spend the money in the trust. The trustee can make sure the money is used for the beneficiary’s necessities, and keep the beneficiary from squandering the money. This is a good option if you’re concerned that a family member’s mental illness will keep them from spending their inheritance wisely. This type of trust also makes sense for somebody who is not receiving, and does not plan to receive, public assistance.

Third-party special needs trust. Similar to a discretionary trust, a special needs trust utilizes a trustee to make distributions for the beneficiary’s benefit. However, instead of going directly to the beneficiary, the money is used to pay for certain supplemental needs, such as personal care, therapy, and education. As a result, the money and property in the trust does not disqualify the beneficiary from becoming eligible for or receiving needs-based government benefits.

Mental illness varies, and there’s a difference between suffering from bipolar disorder or schizophrenia vs. a minor case of anxiety or depression. Some mental health issues come and go, while others are always present. In some cases, a person may be genetically predisposed to mental illness that hasn’t yet manifested. Being proactive in your estate planning can protect you and your loved ones. Your estate plan should reflect what you know now and be updated to reflect changes in your life and the lives of your family members.

If you need to set up an estate plan or revise an existing estate plan around mental health concerns, we are here to help. Call Santaella Legal Group, serving San Ramon, Danville, Dublin, Pleasanton & the Tri-Valley area, at (925) 831-4840 to set up a consultation.

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