An article in the October 9^th edition of The Wall Street Journal discussed estate planning for disabled children and adults with special needs.

According to the WSJ, more than 41 million Americans, or almost 15% of the population, have some type of disability. In addition, 6.2% of children ages 5 to 15, or 2.8 million kids, have disabilities. And individuals with disabilities are living longer than ever before.As a result, many disabled children will outlive the parents who support them. These facts have lead to the establishment of estate planning practices and the rise of professionals who focus on disability planning for special needs children and adults.

Special needs planning involves maintaining eligibility for needs-based government benefits such as Supplemental Security Income (SSI) and Medicaid. Government payments can cover much of a disabled person’s expenses. But in order to qualify for them, individuals cannot have assets in their own names that exceed $2,000 (not including a home, a vehicle and basic personal items). In 1993, Congress permitted special-needs individuals under age 65 to have trusts funded with their own money — such as assets from a legal settlement or an inheritance — and still have access to government benefits. More common, however, are so-called third-party trusts, in which parents provide funding for trusts that benefit their children. Funds transferred to a trust are not considered to be assets of the special-needs individual, as long as there’s an independent trustee who controls distributions of the trust assets. Importantly, the trust provides a fund to pay expenses and thereby improve the quality of life of the disabled person after the parents have passed away.

Rules governing special-needs trusts are complicated and vary by state and by the source of the funds. It is also crucial for grandparents and other relatives to retool their own estate plans to leave gifts or inheritances to the special-needs trust, rather than to the person with disabilities directly, in order to preserve eligibility for government programs. Beneficiary designations on retirement accounts and life-insurance policies should also go to the trust.

Because of these complexities, professionals have begun to specialize in special needs planning. The WSJ featured the Academy of Special Needs Planners as a professional group which provides referrals to lawyers familiar with special needs planning, and other resources. The owner of this weblog is a founding member of the Academy of Special Needs Planners.

The Wall Street Journal article can be found here – the-wall-street-journal-article