Tips For Parents Of Children With Disabilities And Other Special Needs Who Are Planning Their Estates

The following list contains some of the most frequently encountered issues faced by parents of a child with special needs who wish to arrange a secure future for their disabled child through estate planning.

  1. Don’t disinherit the child with special needs.
  2. Carefully consider the division of assets among all of the children.
  3. Understand the differences between public benefits such as Medicare, Medicaid, Social Security Disability benefits and Supplemental Security Income (SSI).
  4. Establish a third-party special needs trust funded with assets belonging to the parents to maintain the child’s eligibility for needs-based public benefits.
  5. Carefully choose the trustee of a special needs trust.
  6. Prepare a letter of intent to assist the trustee of a special needs trust.
  7. Include contingent special needs provisions in estate planning documents.
  8. The parents’ general durable powers of attorney should permit the agent to make discretionary, nonsupport distributions to or for the benefit of their special needs child.
  9. Parents should review all beneficiary designations to insure that no resources pass directly to the child with disabilities.
  10. Consider second-to-die life insurance as a lower cost source of funding for the special needs trust.
  11. If IRAs, 401(k)s and 403(b)s must be used to fund the special needs trust, the retirement assets should be accumulated inside a special needs trust to avoid negatively affecting the child’s needs-based public benefits.
  12. Coordinate other relatives’ estate planning documents with the parents’ special needs trust.
  13. If the child with disabilities has accumulated his or her own assets, consider helping the child establish a first-party, self-settled special needs trust funded with the child’s assets to preserve eligibility for public benefits.
  14. If the parents may themselves soon need nursing home Medicaid benefits, consider establishing a “sole benefit” special needs trust for the disabled child and funding the trust with all of the parents’ assets.
  15. Divorcing parents of a child with special needs should insure the disabled child maintains eligibility for public benefits by arranging for child support to be paid to a first-party, self-settled special needs trust.

Source: March/April 2010 edition of Probate & Property magazine, a publication of the American Bar Association