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.
- Don’t disinherit the child with special needs.
- Carefully consider the division of assets among all of the children.
- Understand the differences between public benefits such as Medicare, Medicaid, Social Security Disability benefits and Supplemental Security Income (SSI).
- 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.
- Carefully choose the trustee of a special needs trust.
- Prepare a letter of intent to assist the trustee of a special needs trust.
- Include contingent special needs provisions in estate planning documents.
- 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.
- Parents should review all beneficiary designations to insure that no resources pass directly to the child with disabilities.
- Consider second-to-die life insurance as a lower cost source of funding for the special needs trust.
- 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.
- Coordinate other relatives’ estate planning documents with the parents’ special needs trust.
- 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.
- 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.
- 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