When we hear the term “special needs” we often think of children, but a family may have a young adult or older relative with a physical or mental disability that falls under the umbrella of special needs. Individuals with special needs may qualify for government benefits, including Supplemental Security Income (SSI) and Medicaid. Some may be dependent on these benefits. Therefore, estate planning for beneficiaries with special needs is a bit like walking a tightrope: on the one hand, you want to use your assets to provide them with as much financial security as possible. On the other hand, you don’t want to leave your loved ones assets in such a way that it may jeopardize their eligibility for needed government benefits. Here are five planning tips for families with special needs.
We always emphasize that it is never too soon to create your estate plan, but it could soon be too late. That is true for all families, but it is especially true if you have a dependent with special needs. If you fail to plan when you do not have special needs to consider, your loved ones may be in a difficult spot, but may be able to compensate. Your typically-abled children may be able to get scholarships for school and then work to support themselves, for instance. A loved one with special needs may not have that ability, and may suffer seriously for your lack of planning. Do not let this happen.
Many families are advised by friends that they should completely disinherit a loved one with special needs to ensure they qualify for government benefits. We cannot emphasize enough what a bad idea this is. With proper planning, including special needs trusts, individuals with special needs will still be able to get the benefits they need and receive their inheritance.
Because government benefits typically address only the most basic of needs, most people will need more than just those benefits to live a good life. An experienced estate planning attorney will be able to help you devise a plan to maximize your loved one's access to benefits without depriving them of their inheritance.
On the one hand, you shouldn't disinherit your beneficiary to preserve their eligibility for government benefits; on the other hand, don't make the mistake of treating them just like any other beneficiary. If eligibility for benefits is a concern, a special needs trust is a must.
Depending on the beneficiary and their limitations or medical issues, their special needs may include a variety of things: medical and dental care; training and education; transportation and mobility equipment; insurance; and more.
Depending on the beneficiary and their limitations or medical issues, their special needs may include a variety of things: medical and dental care; training and education; transportation and mobility equipment; insurance; and more. And just as your life is enriched by "non-essential" expenses such as dining out, travel, electronics, and the like, your beneficiary's life will be better with those things, too. Think about the kinds of things you provide for your loved one's quality of life now; you will want to make sure their special needs trust is funded sufficiently so that they can continue to enjoy those life-enhancing things in the future.
You may think of your estate plan as a private matter, and in many ways, it should be. But to the extent that other family members will want to leave money to your loved one with special needs, they may need some education about estate planning for special needs. For example, we know a family whose eldest son is autistic and nonverbal. They carefully constructed an estate plan to address his needs as well as those of their neurotypical children.
However, the young man's grandfather mentioned that he had created a trust for the benefit of the autistic young man. It was not a special needs trust, and could have seriously jeopardized his eligibility for benefits. Because the parents became aware of the existence of this trust, they were able to help the grandfather go back and create a special needs trust more in keeping with the young man's needs.
The lesson: If you are not sharing your estate plan with others, remember they might not be sharing theirs with you, either. You might find out too late that your child has "come into money" in a way that might not be best for them. Let your family members know you've created a special needs trust and encourage them to contribute to it if they plan to gift money or leave money to your child with special needs.
If you have a child with special needs, you may be relying on your other children to take care of their sibling financially after your death as you do during your life. Your kids may love their sibling dearly, but this is a risky proposition for a number of reasons.
If you leave extra money to your other kids to care for their sibling with special needs, all kinds of things can happen. First, that money legally belongs to your other kids, even if you leave explicit instructions that they are to use it to care for their sibling. They may choose to use it for their own benefit.
Even if you trust that your other kids would never misappropriate that money, they might still lose it. Because the funds are legally theirs, they could be reached by a judgment creditor or by a divorcing spouse who may be entitled to half of it. There is also the possibility that the child to whom you leave the money will die before the child with special needs. If that happens, his or her heirs will get the money—and might not use it as you intended. Likewise, the child who inherits the money could become incapacitated or disabled themselves, and need to "spend down" those assets to qualify for benefits they need.
With so much that could go wrong, we come back to our first point: the time is now. If you have a loved one, especially a child, with special needs, you just cannot afford to delay putting a plan in place. We invite you to contact our law office with any questions you may have about planning for a loved one with special needs.
You may also be interested in these articles about planning for special needs.