Rainman: Sanford Babbitt’s Mistakes Improve Your Special Needs Estate Plan

In the movie Rainman, Charlie Babbitt discovers he has an older brother with autism he never knew about after the death of their father, Sanford Babbitt. Despite the father’s attempt at a special needs estate plan, he made some crucial mistakes.

Charlie was three years old when his older brother Raymond was moved to a residential hospital for people with disabilities.  From then on, Charlie is raised by his widowed father without any knowledge of the existence of his brother.  Upon the death of his father and learning that he has been left almost nothing of the multi-million dollar estate he thought he was sole heir to, Charlie accidentally discovers Raymond, setting off a series of events that eventually lead to a full and tender relationship between the two brothers.

What did Sanford Babbit get right?

Sanford Babbit clearly consulted with a special needs law firm. He provided money for Raymond’s care, and he appointed a person who was well acquainted with Raymond to look after him.

Sanford understood that Raymond would need lifelong care and that he would need someone to manage and spend his money for him.  Upon his death, Sanford’s assets were placed in trust, and while we don’t specifically know from the movie whether it was a special needs trust or not, the money is clearly protected and designated solely for the care of Raymond.   

The trustee chosen to handle the money is the doctor who has looked after Raymond for 30 years, so he is well-acquainted with Raymond, his needs, and also with the priorities of his father, an important aspect of ensuring that Raymond’s life can continue with little to no disruption.

What did Sanford Babbitt get wrong?

Basically, Sanford failed to consider the possibility and impact of conflict on Raymond’s life. This left Raymond unprotected in some important ways. He either did not do everything recommended by his special needs law firm, or he was working with a firm that did not have enough experience with special needs planning.

Secrets can backfire

Sanford’s first mistake was in keeping Charlie in the dark about his brother. Certainly there is no law that says parents have to tell siblings about each other, not is there a law that requires parents to leave their estate to their children, but by letting Charlie think he was an only child, Sanford ensured that Charlie would be surprised, hurt, and probably angry when he discovered he had been essentially disinherited. Grief is difficult for people to deal with, and it tends to magnify feelings.

The most common approach to inheritance is to divide the parents’ estate equally among the children, so anytime a parent intends to leave their property differently it is helpful to keep the kids informed beforehand. Removing the element of surprise allows the kids to work through any feelings about the distribution plan without the element of grief muddying things up.

If Charlie had known in advance about Raymond and known that the bulk of his father’s estate was going to be set aside to care for Raymond, his behavior and reactions would not have been so disruptive to Raymond, even if Charlie was unhappy about his father’s choices, he would have had an opportunity to deal with those feelings without blowing up Raymond’s life and safety.

Formal Guardianship provides the best protection long-term

Sanford also left Raymond vulnerable by not setting up a court appointed guardianship for him. It is understandable that he probably felt that was not necessary due to Raymond’s living situation and his protection from outside influences, but it was the failure to have a guardianship that allowed Charlie to take Raymond with him to Los Angeles. The doctor who was Raymond’s informal caretaker had no legal right to prevent Raymond from leaving and no legal way to prevent Charlie from leaving with him.

If the doctor had been the legal guardian of Raymond, he would have had the ability to involve law enforcement officials to find and return Raymond to his home. Without that, the doctor had few options other than initiating a guardianship proceeding at that time, which of course is what ultimately happens in the movie when Charlie himself initiates the process in order to seek to have himself appointed as guardian. But Raymond was left unprotected and vulnerable in the interim.

Siblings are an important part of the community

And finally, Sanford erred by denying Raymond the ability to have a relationship with his brother Charlie. Even under guardianship, individuals generally have a right, to the extent they desire to and can exercise it, to maintain relationships with friends and family. A guardian does not have the right to isolate a person with a disability for reasons unrelated to the individual.

Sanford’s appallingly awful relationship with Charlie was between Sanford and Charlie. Raymond had a seperate and independent right to have a relationship with his brother, which was denied to him by Sanford’s petty actions.

Parker Counsel Legal Services is a special needs law firm providing estate planning, special needs trusts, guardianship, and more to families with children who have developmental disabilities. Offices in Texas, Massachusetts, New Jersey. To see how we can help your family prepare for the future, schedule a short phone call here, or call 833-Red-BOOT (833-733-2668) or email at legal@parkercounsel.com.

Harry Potter and the Great Estate Planning Fiasco

A lot of families find it helpful to hear what other families have done in their estate planning, and they get ideas from what others have done.  It’s most helpful, I think, when you know something about the family itself, so let’s talk about Harry Potter. (We have previously discussed Batman here) As a special needs law firm, we find it is especially important to get to know the family.

Who will care for the orphan?

Harry was famously orphaned as an infant when his parents were murdered by Voldemort. At the time, though, it was believed that Sirius Black had either killed them or was involved in their killing.  Because Harry’s parents, James and Lily, had named Sirius as Harry’s godfather, under wizarding law that would mean he was the designated guardian for Harry in the event something happened to the parents, which of course, it did.  But because it was believed that Sirius was involved in the killing, Dumbledore stepped in and took Harry to be raised by his relatives, the Dursleys, which in hindsight was a very bad deal for Harry.

[If you’re interested in more case studies and discussion about how the wizarding world handles it orphans, like Tom Riddle and Teddy Lupin, you might want to check out this chatboard. ]

In the muggle world, if a family had named a designated guardian for the child who was determined to have killed the parents, a court, much like Dumbledore, would likely determine that person not to be a suitable guardian, and refuse to appoint them, even though the parent’s had named that person.  A judge will always look to see if the named person is otherwise suitable at the time the appointment comes along, thus protecting the child much as Dumbledore attempted to do.

While James and Lily could not have predicted that Sirius would be alleged to have been involved in their murder, they could have predicted that for a variety of reasons Sirius might not be able to serve as guardian when the time arose, and their best course of action would have been to name backup guardians.  With an apparently large number of close friends in the wizarding world, naming a backup to Sirius would have allowed Dumbledore to consider other people as guardian before turning to the Dursley’s, and Harry might have been spared the closet and abuse he endured as a young child.

How to handle the money

Lily and James also would have needed to create a plan for the property and money they had, and how that would be left to Harry.  Kids who inherit from their parents while still minors are never handed the keys to the bank account, but they generally do get full access and control of the property and money as soon as they turn either 18 or 21, depending on the state. In the wizarding world the age is 17, so Harry would have gotten full control of everything in the Gringott’s Vault as soon as he turned 17, which is a scary thought for most parents. Butter Beer for all!

The better way for the Potters to have done this would have been to appoint a trusted person – and some back up people since Sirius would likely have been their first choice – to act as trustee for the property until Harry reached an age that they felt he would be able to appropriately handle the money.   Until that time, the trustee would make decisions about spending for Harry’s benefit.  The actual age chosen by each set of parents depends on what they know about their child, their own philosophy of money and adulthood, and the amount of money likely to be available. The scenes where Harry heads to the Gringott’s vault at the beginning of each school year and grabs a bunch of money, with no supervision and no thought about budgeting or accounting, should make every parent cringe.  Setting up your estate plan to avoid that is easily accomplished.

If you’re ready to avoid your own estate planning fiasco, call Parker Counsel Legal Services or email us for a quick consultation on how we might be able to help. legal@parkercounsel.com or 833-RED-BOOT (833-733-2668)

How should Batman’s parents have done their estate plan?

One of our best known vigilante crime fighters, Batman, was orphaned at the age of 8 when his parents were murdered.  He swore to dedicate his life to fighting crimes like that which killed his parents, and by the time we see him in adulthood he has spent millions of his billion dollar fortune designing and building crime fighting gadgets galore and an elaborate secret cave for operations headquarters. Let’s see how that might have come about.

What issues do the Waynes have?

They own businesses, so they need succession planning to make sure the company can continue running.

They have a minor son, so they need to plan for his care until he grows up and for how and when they will give him the money he will inherit.

What did they own?

We don’t actually know if the elder Waynes left a will or any other estate planning, but I would guess it was incomplete, at best, as I’ll explain below.  We know that they had enormous wealth in the form of a number of profitable companies falling under the umbrella of Wayne Industries. There was money and potentially company ownership from Mrs. Wayne in addition to Wayne Industries, but it is less clear how that was owned and managed. This means that in addition to planning for the distribution of their personal wealth, Bruce’s parents also had to prepare succession planning for their businesses and business interests. 

And of course, the most important piece of their planning, and where I suspect they failed, was in the management and distribution of their wealth and businesses to their son.

Businesses

The Waynes appear to have had at least some succession planning in place for their businesses, as we know that the companies weathered the immediate period after their death and that they were thriving many years later when Bruce was flying about the town on his bat wings.  This meant that the companies must have had either a corporate structure or a well written set of bylaws or partnership agreement for an LLC or partnership structure. In a corporation, the company itself has the ability to replace leadership, adjust to circumstances and operate independently of whether their officers or any of their shareholders died unexpectedly. The passing of shares is generally controlled by specifically created and adopted company policies, or controlled by state law. 

In the case of an LLC or partnership, where there are typically fewer people involved in the running of the company, a plan setting out who owns shares versus who has the ability to run the company is important to prevent infighting or take over by inexperienced leaders. The Waynes do appear to have prevented the demise of their companies through advance planning of some sort. While Bruce, as their only heir (if they did not have a will), would have inherited their interests in the companies, as an 8 year old he would have been unable to run them, requiring the parents to prepare for the possibility of their early death by having other adults ready to step into company leadership roles. Written plans, along with properly adopted bylaws and policies within the company, would have allowed for this.

Bruce

We know that Bruce inherited all or the majority of his parents’ estates due to the seemingly bottomless pit of money he has access to in later life.  Most people do leave all or most of their estate to any children they have before considering gifts to other relatives or friends, and the Waynes seem to have followed this pattern. If they had no will at all, then in most states everything they owned would go to their child.  But as an 8 year old, Bruce would not have been able to exercise control of any money or property at that time. The best way to provide for minor children is through the creation of a trust that will hold their inheritance until they are older and allow an appropriate person or trust company to manage the inheritance until the child can take over.  If the Waynes did not have a will that created a trust for Bruce, a court would have  created one for him.  In that situation, when Bruce reached the age of majority, which today is usually age 18 but may have been 21 if we are talking about the Golden Age Batman, he would have been give all the fortune outright, having complete control over management and spending of the money as soon as he turned either 18 or 21.

If the Waynes had created a trust in advance, they would have been able to delay Bruce’s access to the entire sum of money, and they would have been able to allow time for him to learn how to handle such a large sum responsibly.  Some parents direct the trustee to pay for higher education or down payment on a home or even a sum toward starting a business, but access to full control by the child is delayed until an older age or a life milestone, such as obtaining a college degree.  If the amount of the inheritance is very large, it may be released to the child in stages, so that some money comes under their control while the rest stays in trust and protected from the missteps of youth.

Basically, you can set the trust up to do what you expect you would do for your child if you’d been alive and they asked for money. 

I suspect that Bruce’s parents did not have a trust set up for him because it is hard to imagine that the ways in which he used his money would have been green lighted for loans or gifts by his parents.  “Hey Mom and Dad, I want to spend a big chunk of your hard earned money to dig a giant hole under our tower (I’ll pay an engineer to make sure it doesn’t fall down) and then try to invent super high tech comic book toys so I can confront highly dangerous and violent criminals all alone.  Is that ok?”  

I like to think Mom and Dad would, at the very least, have required Bruce to provide a proof of concept and marketability study before backing this particular hobby.  Which is why I’m pretty sure young Bruce had sole control over his money at about the same age many young men buy their first car and then roll it into a ditch.

If you want to keep your young super heroes safe and solvent and protected from their own passions, a trust for minor’s is definitely the way to go.

Power of attorney is alternative to guardianship for elderly persons, not young adults with developmental disabilities

ID-10067073One of the most common questions I get from parents of teenagers and young adults with special needs is whether they should do a guardianship or a power of attorney.  Powers of attorney are frequently talked about as alternatives to guardianship, but in reality, it’s not that black and white. For elderly people, a power of attorney can head off the need for a guardianship.  But for people with developmental disabilities, it’s a very different story.

A guardian is a person appointed by a court to care for an incapacitated person.  The legal description of incapacity in Texas law is: An adult who, because of a physical or mental condition, is substantially unable to provide food, clothing or shelter for himself or herself, to care for his or her own physical health, or to manage his or her own financial affairs.  Other states will have slightly different, but similar definitions.

A power of attorney, on the other hand, is an appointment by an individual of someone to handle that person’s affairs on their behalf. The person signing the power of attorney must NOT be incapacitated, or the power of attorney appointment is not valid.  In other words, the person signing the power of attorney must be able to fully understand the nature of the document and its consequences.  A durable power of attorney means that once you sign it, it will continue to be effective until you revoke it, even if you subsequently become incapacitated.

Powers of attorney are extremely useful in avoiding the need for a guardian in elderly people who develop dementia or other conditions that cause them to be legally incapacitated.  As long as they have signed a durable power of attorney before the incapacitating condition occurred, the person they named in the power of attorney will be able to handle their financial and other affairs without having to go to court and seek guardianship.

Although there are many reasons to have a power of attorney, one of the most important ones is so that in case you become disabled later in life, someone will be able to take care of you without anyone having to go to court and spend the time and money to get a guardianship.

For children with developmental disabilities, that’s not a possibility.  Unlike an adult who becomes disabled later in life, a child who is born with or who is diagnosed with a developmental disability and who meets the legal definition of incapacity,  has never had a time when they were not incapacitated.  Therefore, there is never a time when they have the capacity to sign a power of attorney. There was never an in case for them.  For children with a developmental disability who cannot care for themselves when they turn 18, guardianship is the only option.

Of course, not all young adults with a developmental disability are unable to understand and handle their own care.  If they are not legally incapacitated, then a power of attorney is completely appropriate so that they can name someone that they want to be able to help them with their affairs.

The decision whether to seek guardianship or a power of attorney is not an either/or situation for a young person with a developmental disability.  If they are incapacitated, they cannot legally create a power of attorney.  And if they are not incapacitated, then they are not in need of a guardian.  The question is not whether to have a guardian or a power of attorney, but rather the question is whether they are legally incapacitated or not.

What you do for your child when they turn 18 is dependent on your child’s individual abilities and level of functioning.  If it is not clear, begin discussing this with your child’s doctor’s in the year prior to their 18th birthday.