One of the biggest worries for parents of children with special needs is what will happen when the parents are gone. Who will care for their children and will they have enough money, not just to survive but to enjoy life?
This worry is compounded by the financial restrictions levied by the Medicaid program, which often is the only type of health insurance for which their children qualify. To keep the special needs child within the income limitations, parents may think that they need to disinherit that child or bequeath his inheritance to a sibling. Both of these options are problematic.
Disinheriting a child would leave her only the bare necessities of food, housing and clothing provided through government benefits. Making a sibling her guardian puts an undue burden on your other children, who may be unable to fulfil those obligations if they face a financial crisis such as a divorce.
However, there is another way. Putting assets into a Special Needs or Supplemental Needs Trust allows your child to preserve assets to improve quality of life without disqualifying him from Social Security Income or Medicaid.
Parents should be aware that funds from the trust cannot be distributed directly to the disabled beneficiary. Instead, it must be disbursed to third parties who provide goods and services to the disabled beneficiary.
These trusts are flexible and can be customized to provide funding for the type of care that you would have provided if you were still alive. An attorney who specializes in special needs planning can help you set up a Special Needs Trust to supplement your loved one’s public benefits.
The Special Needs Trust can be used for a variety of life-enhancing expenditures such as:
- Annual check-ups at an independent medical facility
- Attendance at religious services
- Supplemental education and tutoring
- Out-of-pocket medical and dental expenses
- Transportation (including purchase of a vehicle)
- Maintenance of vehicles
- Purchase materials for a hobby or recreation activity
- Funds for trips or vacations
- Funds for entertainment such as movies, shows or ballgames
- Purchase of goods and services that add pleasure and quality to life: computers, videos, furniture, or electronics
- Athletic training or competitions
- Special dietary needs
- Personal care attendant or escort
Special Needs Trusts are a critical component of your estate planning if you have disabled beneficiaries for whom you wish to provide after your passing. An estate planning attorney can help you create the trust that best fits your family’s needs.
You may need a pooled special needs trust. In a pooled special needs trust, the assets of a group of beneficiaries are pooled together and managed by a non-profit organization for the benefit of the beneficiaries. Your loved one has his own sub-account so that his funds are used only for him. This setup works well if there are no family members available to act as a trustee or the level of assets is not large enough to justify the complexity of establishing a stand-alone trust.
Alternately, you can establish a stand-alone trust funded with a separate asset like a life insurance policy. Other family members or friends may contribute to the trust as well.
If you have a child with special needs you cannot delay planning for her future. Procrastinating could have major consequences from which she may not recover, but making a plan now can give you peace of mind.