'I'm desperately trying to plan ahead while I'm still able'

"Everything is intended to go to my eldest grandson, who is unable to manage his finances because of severe mental illness." (Photo subject is a model.)

Dear Quentin,

I'm a 72-year-old widow living in a small town in Nevada with limited access to attorneys. My estate is worth $400,000, depending on the value of my investments. Most of my assets already have beneficiary or transfer-on-death designations: my bank accounts are payable on death, my car and home have transfer-on-death designations, and my investments have beneficiaries.

Everything is intended to go to my eldest grandson, who is unable to manage his finances because of severe mental illness. He lives three states away. I currently give him $1,000 a month, much of it comes from my dwindling savings. My biggest concern is making sure he is cared for after I'm gone.

I originally named an 84-year-old friend as trustee on my trust, but he can no longer travel, and his physical and mental health are declining. All of my relatives have declined when I asked if they would serve as trustee. How do I find someone qualified and trustworthy to handle a small trust like mine? Is a professional trustee an option, and are there affordable ones?

I served as an executrix for a neighbor and spent hundreds of hours and more than $10,000 of my own money on estate expenses. I don't want to leave someone else in that position. If my trust remains unfunded, who pays the expenses of administering my estate/trust, such as attorney fees, cremation, and other costs?

If I put my checking and savings accounts into the trust, would those funds be available to pay these expenses so the trustee would not have to pay out of pocket? The attorney who prepared my trust charged $1,800 for a simple two-page document and charges $400 per hour. She told me her first appointment after my death would cost $1,000, plus her hourly rate.

Finally, how can I protect the inheritance for my grandson if he cannot manage money himself? I have looked into an ABLE account, but he has not been formally determined to be disabled. Maybe a televisit with a doctor could get a medical certificate stating he is disabled. Would a special-needs or supplemental-needs trust be more appropriate?

I'm desperately trying to plan ahead while I'm still able.

The Grandmother

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You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

A trustee and executor are two different roles. The latter oversees the probated estate and the former oversees the trust.

Dear Grandmother,

You appear to be overwhelmed by all the moving pieces. Step 1: Review all your beneficiary designations. Step 2, 3 and 4 are bigger ones:

Contact your bank's trust department or even a trust company. Request a representative to serve as successor trustee of your existing trust. Ask about their fees, whether they have minimum asset requirements, and ensure that the trust is structured to allow for funeral expenses. (The average cost of cremation can be anywhere from $2,000 upwards.)

Before you do that, an estate-planning attorney should review all of your existing trust and beneficiary designations before making changes. (Maybe don't hire your $400-an-hour lawyer.) Given your grandson's needs, ask whether a third-party special-needs trust would both protect his inheritance and preserve any potential eligibility for government benefits.

The fact that your existing trust is unfunded is a practical issue rather than a fatal one. You can address this by transferring all appropriate assets into the trust. Coordinate this with your other accounts, given that they seem to already have listed beneficiaries. Crucially, it should be structured to protect your grandson so the successor trustee can manage everything.

A trustee and executor are two different roles. The latter oversees the probated estate, the former oversees the trust. Banks and law firms often have fiduciaries who act as executors. Given the complexity and time involved, executors can bill the estate for their time and effort, as long as they follow the state laws, court rules and instructions in the will.

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Third-party special-needs trusts

Third-party special-needs trusts are typically created and funded by a donor, you in this case. "In general, the trust assets may be used for most supplemental needs of the disabled beneficiary," according to this guide from Fidelity. "Additionally, upon the death of the disabled beneficiary the donor has control over the distribution of any remaining trust assets."

Irrevocable first-party special-needs trusts must be established by a parent, grandparent or guardian of the person with disabilities, or by the court, Fidelity adds. The trust must be funded with the disabled beneficiary's assets and, upon the death of the disabled beneficiary, any remaining assets in the trust are subject to repayment of medical assistance benefits.

A trust can give you privacy and smoother estate management if you were to become incapacitated. As you have discovered, they can come with high costs, paperwork, bureaucracy and ongoing management and review. They can be useful in families with problems, such as addiction and substance misuse, or heirs who are unable to manage their lives.

A transfer-on-death (used for investment and securities accounts) and a payable-on-death (for bank accounts) are low-cost ways to pass assets directly to heirs. A special-needs trust or spendthrift trust distributes funds based on need. If a grandchild decides to go to college, the trust can provide for that. If a beneficiary needs rehab, the trust could fund that too (or not).

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Your grandson's disability status

An ABLE account (Achieving a Better Life Experience) allows individuals with disabilities to save up to $100,000 without losing government benefits. Getting a formal determination for Social Security Disability Insurance and/or setting up an ABLE account is not as simple as a doctor's letter. For Social Security, for example, the determination is made by the agency.

As for assessing the mental health of your grandson, a telehealth visit can absolutely be an appropriate starting point, particularly if he is homebound. A psychiatrist, psychologist or another qualified mental-health provider can evaluate him and create medical records documenting his diagnosis, history, treatment and limitations.

A member of the Moneyist Facebook Group cautions: "I understand that your motivation is to provide for a grandson whom you love and who you believe is genuinely disabled. But good intentions do not justify trying to obtain a financial or tax benefit by first deciding what result you want and then looking for someone willing to provide the certification necessary to obtain it."

"If your grandson legitimately meets the legal requirements for an ABLE account, then by all means have him properly evaluated and documented and use every benefit to which he is legally entitled," they add. The takeaway: seek a genuine evaluation, rather than looking for a provider who will simply sign a form saying he is disabled.

You can create a trust for your grandson without having to wait for a disability designation.

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The Moneyist regrets he cannot respond to letters individually. Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

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-Quentin Fottrell