It is important to understand the basics of special needs planning, so that you can plan for your child’s future. There are many issues to address, but experienced professionals will be able to help.
Special needs planning is challenging. It’s important to have a strong team to work with. An estate planning attorney with experience in helping special needs families will be able to guide you through the process. They will also likely have access to other professionals to help.
A recent Forbes article, “Special Needs Kids Require Specialized Estate Planning,” says that if you have a child with special needs, it’s critical that you look at your planning options with your estate planning attorney and discuss your child’s health, capabilities and prognosis. You can then customize a plan that works for your child, with as much flexibility as possible.
Those with enough assets often would rather not have their child get any government benefits and will set aside an amount to cover all the child’s living expenses in trust. Since the parents aren’t concerned with government benefits, the trust can be a discretionary trust that will distribute income and principal at the trustee’s discretion for the benefit of the child throughout the child’s life.
If there is a good chance the child will receive government benefits, many parents create special needs trust to supplement (not replace) the government benefits that the child will receive. The trust must be drafted so the child doesn’t become ineligible for the government benefits. These benefits provide for the child’s basic needs like a place to live, so the special needs trust will defray the cost of extras such as trips and entertainment.
If the parents can’t determine if their child will be eligible for government benefits, another option is for the parents to give their current trustees the authority to create a separate special needs trust at the time of the surviving parent’s death. Therefore, if the child is receiving benefits, the trustee can create the trust at that time with the goal of preserving the child’s benefits.
All these trusts can be funded now. The parents can establish the trust and transfer cash or other assets to it, or the trust can be created now and left empty until a parent passes away. At that point, money can move into the trust from the parent’s estate, another trust, or from a life insurance policy.
Some parents elect not to create a trust for their child and to disinherit him completely. The thinking is that the child can be supported solely by government benefits. Others go with a combination approach. They disinherit the special needs child and leave more assets to their other children with the understanding that the other children will care for the special needs child. However, this isn’t a great idea. The siblings have no legal obligation to care for his or her sibling with special needs, just a moral one. If the child who inherited the bulk of the estate gets divorced, the assets are also susceptible to division upon divorce. Finally, the assets are liable to a creditor’s claim if the child is sued.
Give yourself the peace of mind that comes from knowing you have done everything possible to ensure that your special needs child will have what he or she needs when you are no longer here to protect them.
Reference: Forbes (March 27, 2019) “Special Needs Kids Require Specialized Estate Planning”