Estate Planning Options Available for Individuals with Special Needs Children

Parents of special needs children are often consumed with ensuring the day-to-day needs of their children are met, leaving little time to consider the future. The process of estate planning for special needs children can be complex, making it something that gets put off, sometimes until it’s too late. Fortunately, a skilled professional can help create the long-term plan you need to offer you lasting peace of mind and financial security for your loved one. 

Purpose of Estate Planning for Special Needs

Estate planning for special needs is particularly important because most people with disabilities receive some type of public benefits. One of the primary purposes of estate planning is to preserve those benefits for the disabled person after your death while also enhancing their quality of life through an additional pool of funds. 

Simply leaving money to someone in a will won’t accomplish this goal because the child will suddenly have too much “wealth.” This would either reduce their SSI and Medicaid eligibility or render them ineligible for future benefits. To continue receiving public assistance benefits, a specific type of estate plan is necessary. 

The Role of a Special Needs Trust in Estate Planning

When it comes to securing the long-term financial well-being of a special needs child, whether or not they have reached adulthood, parents and guardians must plan carefully. Special Needs Trusts (SNTs) are the foundation of estate planning for individuals with disabilities because they allow assets to be set aside without jeopardizing government benefits like Supplemental Security Income (SSI) and Medicaid. There are several different types of SNTs:

Third-Party SNTs

These trusts are funded by someone other than the beneficiary, such as the child’s parents or grandparents. A designated trustee will manage the assets within the trust so they provide for the beneficiary’s needs. When the beneficiary passes away, the remaining assets in the trust can be distributed to other designated heirs, meaning they are not subject to Medicaid payback. 

First-Party SNTs

A First-Party SNT is primarily funded by the beneficiary’s own assets, such as money received from lawsuit settlements or an inheritance. There are more strict requirements for these trusts. There is a Medicaid payback provision, meaning Medicaid will be reimbursed from the trust for covered expenses after the beneficiary passes away. Also, this type of trust usually must be created before the beneficiary turns 65. 

Pooled Special Needs Trusts 

This type of special needs trust is managed by a non-profit organization. It offers beneficiaries flexibility because accounts are managed under the umbrella of a larger overall trust. 

Establishing and Administering a Special Needs Trust

While SNTs are valuable estate planning tools, they’re not something you can create on your own. You’ll want to consult with a knowledgeable estate planning attorney who can help guide your choices and ensure that the trust you establish is appropriate to your needs and meets all of your state’s legal requirements. 

Once the trust is legally established, you’ll need to fund it. This involves placing accounts into the name of the trust. You will also need to name a trusted person as the trustee who will administer the trust and ensure the terms and your wishes are adhered to. 

Special needs trusts also have guidelines that outline how the money can be used. For example, the funds are available to cover a wide range of expenses, such as housing, medical costs, equipment, education, and personal needs. They can’t, however, pay for expenses already covered by government benefits. 

Other Estate Planning Tools for Special Needs Children

In addition to a special needs trust, you may wish to consider some other essential estate planning tools, such as:

• Set up an ABLE Account, which is a tax-advantaged savings account that lets you save up to $15,000 a year without jeopardizing government benefits. 
• Create a last will and testament to cover items not listed in your trust. 
• Name a trusted family member or friend as a guardian or conservator while your child is still a minor. 
• Set up a Power of Attorney (POA) to designate a person who has the legal right to handle your financial affairs if you’re unable to do so. 
• Create a living will to give direction regarding your health care wishes should you become incapacitated. 

Everyone needs an estate plan, but families with special needs children should make this one of their highest priorities. Louisville Estate Planning Attorney is dedicated to providing those searching for information about estate planning, wills, trusts, and other tools with the information they need to make the most informed decisions about their future.