What Is a Special Needs Trust?

How to Care for Children with Special Needs Through Estate Planning.

For many people, the basics of estate planning are simple enough, but for those families with loved ones who are disabled or have special needs, the estate planning process is more involved – and definitely more critical. The latest statistics show that five percent of minor children have some sort of disability, and the burden of caring for these children make estate planning essential. In addition to specialized health care, these children usually need special schooling and intensive therapy, all of which comes at a cost. Here are some tips for parents facing the need to plan not only for their own financial future, but for that of a special needs child:

Deal with expectations.

You should share with us your thoughts as well as any medical opinions about the kind of life you envision for their child. Will he or she be able to work or live independently? Will the child have a shorter life span? The answers to these questions will form the foundation of your plan.

Determine eligibility for public benefits.

In order to meet eligibility requirements for Medicaid and Social Security Supplemental Income programs, a person with special needs or other disabilities must have limited income and assets. This makes it imperative that a child who could benefit from these services not have any assets titled in his or her own name – meaning they should not be listed as beneficiaries on life insurance policies, retirement accounts or plans, in trusts, wills or pensions.

Create a special needs trust.

A special needs trust can be established by a parent or grandparent for the care of a child or grandchild of any age in lieu of leaving an inheritance, which would likely disqualify a special needs person from receiving necessary government assistance.

Parents of a special needs child who also have other children are often tempted to leave their assets to the other children with the understanding that they will take care of their disabled brother or sister.  However, if one of those children gets a divorce, files bankruptcy or pre-deceases the disabled child, those assets could go to an ex-spouse, creditors or others.  To prevent this from occurring, parents should divide assets among all their children equally but place the disabled child’s assets in a special needs trust and add to it with a permanent life insurance policy.

Assets placed in a third-party special needs trust are not counted as assets toward public benefit program eligibility, but these trusts are governed by strict rules so the counsel of an experienced estate planning attorney in establishing this trust is necessary. Parents do not need to fund a special needs trust with cash while they are alive; they can do so through other assets after they die.

Inform Relatives About the Special Needs Trust.

If you anticipate that you or your child will be the recipient of an inheritance, additional steps should be taken to ensure that the gifts do not disqualify your child from from receiving necessary government assistance. That gift could possibly cause more harm than good. Schedule a Life and Legacy Planning Session with Jill Gregory to learn more and create an estate plan that ensures your special needs child will be taken care of in the best way possible.

This article is a service of Jill Gregory Law, a Personal Family Lawyer® firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life and Legacy Planning Session™, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by clicking the button above or calling our office today at 949-514-8842 or 530-581-5455, to schedule a free 15 Minute Phone Consult with Jill Gregory, or a full Planning Session today. Mention this article to find out how to get this $750 Life and Legacy Planning Session at no charge.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.