The importance of financial planning for a relative with special needs
If you are the parent of a child, whether young or adult, with special needs, you want to ensure that he or she receives the proper care when you are no longer able to provide care yourself. The best way to properly prepare for the future care of your child with special needs is to consult with financial planners and attorneys who specialize in special needs planning. These professionals have extensive education in helping families make informed and calculated decisions to ensure the best possible life for the individual with special needs who cannot advocate for him or herself.
A Special Needs Trust allows you to gift assets to a second person, a trustee, to be used solely for the benefit of your special needs child or dependent adult. It is designed to preserve the beneficiary’s quality of life while not interfering with government benefit eligibility, which can be denied if a person with special needs receives an outright inheritance. Inherited assets must be depleted before the government will pay for medical care, food and shelter. This can quickly exhaust even a large inheritance. A Special Needs Trust can preserve the inheritance so that it can be used to pay for things that would otherwise not be available such as travel, education, rehabilitation, and improved access to a wider range of medical and dental services.
How trusts work
A Special Needs Trust is designed to manage funds for individuals with disabilities or special needs (of any age) who receive public benefits related to their disability. This type of trust is set up to preserve the beneficiary’s eligibility for those benefits, including Supplemental Security Income, Medicaid, public housing and other programs.
A trust is a form of property ownership, including both real estate and investments, where one person — the trustee — manages the property for the benefit of someone else — the beneficiary.
Special Needs Trusts that are set up so that the trustee has complete discretion over distributions protect the assets in the trust from being taken into consideration when determining the beneficiary’s eligibility for public benefits.
It is important to note that when trust income and assets are used for the beneficiary, Supplemental Security Income benefits may be reduced.
What to do: consult the professionals
The laws governing trusts are complex and vary from state to state. Therefore, it is important that you work with qualified professionals who have experience and expertise in special needs planning.
There are professionals among the ranks of financial planners and attorneys who specialize in special needs planning. These professionals are experienced in many facets of special needs financial and legal considerations and can perform a thorough evaluation of your situation before helping you take steps to preserve your family’s assets and expected government benefits.
Common approaches to avoid
Unfortunately the most popular estate plan in our country is to do nothing. While it is probably not a conscious decision, many people are uncertain about what to do and end up dying without a plan. In this case, the State’s probate code dictates what happens and the code does NOT take into account the special needs of relatives with disabilities.
Rely on government benefits.
Many families who have a child with special needs rely on Supplemental Security Income, Medicaid or other government benefits to provide medical care, food and shelter. In some cases, families mistakenly believe that it is best NOT to leave an inheritance to a child with special needs as a way to protect government benefits, but they are missing the opportunity to enhance the child’s quality of life.
Depend on a family member, usually a sibling.
While this option frequently seems like the best idea, there are potential problems that should be considered. Even a well-intentioned sibling has his or her own life to lead. If the sibling were to lose a lawsuit or wind up in financial difficulty, they could be required to use the inheritance to satisfy creditors.