Estate Planning Strategies For A Special Needs Child
The saying is that the best inheritance the parents can give their children is devoting few minutes of their time every day for their children. But the fact of life is that parents cannot be with their children forever. The child with special needs may require support and assistance for their lifetime. Parents have to think of estate planning strategies for their child keeping in mind that the child does not disqualify for Supplemental Security Income after they are gone as support for a lifetime can strip away the resources.
The child may never be able to work or earn and will be dependent on programs of government assistance for housing, income, and healthcare. The government programs like Supplemental security income (SSI), HUD section 8 for housing, and Medi-Cal have limits to the income and assets of the special needs person beyond which they will be declared ineligible.
This gives rise to a situation where the parents or the grandparents would disinherit the special needs person with a heavy heart in order to safeguard the continuance of government assistance for their lifetime.
In some cases, the inheritance share of the special needs person is given to their siblings with the request that it must be used for the benefit of the child. This strategy has many inherent problems.
Special Needs Trust
This trust is best suited for the special needs child. The parents create a special needs trust for the special needs loved one. The inheritance of this child is held in a protected trust. Disbursement can be made for the necessities of the special needs person that are not provided by the government assistance programs.
Basically, the assets in the trust do not belong to the special needs beneficiary and hence they are not accounted when determining the eligibility for the public benefits. When the special needs trust has drafted the parents of the beneficiary to appoint a trustee that acts as the money manager but it requires proper planning and the attorney can draft the most suitable clauses with their experience.
With the special needs trust the beneficiary has the best of all the worlds. They continue to receive government assistance and at the same time has a pool of funds to meet the necessities that are not provided through government assistance. Also, the pool of funds can cater to the needs of niceties of the beneficiary.
Even though the special needs trust is a fantastic option, it works best when incorporated into a well thought out estate plan that is best suited to your needs and situation. Care should be taken in regards to monetary gains from qualified assets like SEP, 401(K), 403(b) and IRA (individual retirement account) as it can cause taxation issues. This can be overcomed through proper planning.
A meeting must be arranged with your attorney and your financial advisor to chalk out a detailed plan and choose the best possible options for distributing of assets to both your special needs child as well as the other normal family members and other beneficiaries or charities if any.
The parents of the special child needs to have a well thought out and best possible estate planning in consultation with child support lawyers. This is necessary so that the special needs beneficiary continues to receive the government assistance even after the parents are gone and also the necessities that are not met through assistance can be provided through the special needs trust to make their life as comfortable as possible.