Tag: special needs planning

Estate Planning

A Lifetime Money Management System for Special Needs Children

SchulzeLawGroup

Estate planning presents unique challenges when it comes to special needs children. Optimizing your estate to use, enhance, and enrich assets for your special needs child while maintaining their enrollment in public benefits programs requires careful planning. An estate planning attorney can prepare a special needs trust to accomplish these and other goals you have for your child.

A special needs trust can meet strict financial eligibility rules for means-tested assistance programs because the assets held in the trust are not directly available to the child. A trustee provides benefits to the child via the trust. Parents select this trustee with great care because they will act as the child’s money manager, ensuring proper financial supervision after the parents die. A letter of intent is also a powerful tool to guide the trustee to make decisions that best benefit the child’s unique needs.

In most cases, your special needs child will benefit by selecting a non-family member who is independent to act as your special needs trustee. The range of options includes:

  • A parent, sibling, or another relative, which can be risky,
  • An estate planning attorney,
  • A financial institution or a trust company,
  • A non-profit organization, particularly one with special needs experience, or
  • Co-trustees, such as a trust company, acting in conjunction with a family member.

Each option has advantages and disadvantages that require close counsel with your estate planning attorney or financial advisor before selecting your trustee.

The creation of your special needs trust can happen while you are living or at the time of your death. A last will and testament can incorporate creating the trust, known as a testamentary trust. Parents often set up the trust while alive, known as a living trust (inter vivos trust). The living trust has advantages, including the avoidance of probate, the permission for other family members to make trust contributions (usually grandparents), and the opportunity for a co-trustee to experience what it is like to administer the trust.

Whether or not your trust is revocable or irrevocable affects tax consequences. Generally, you’ll want to choose a revocable trust if the goal is to maintain maximum control over the trust and income tax considerations aren’t a concern. Establish an irrevocable trust when there are concerns regarding income tax consequences, particularly if the trust funds exceed one million dollars. In this instance, both federal estate and gift taxes may apply to the trust.

While there is much to consider and decide, the crucial step to providing for your special needs child is to make it legal. Verbally telling your family how to care for your child is insufficient. In the absence of a will, testamentary trust, or living trust, the state in which you live will determine the outcomes of your estate’s distribution. This situation is not a viable option for a special needs child or any of your children.

Receiving proper legal guidance to implement your estate plan using appropriate trusts is crucial to maintaining a healthy lifestyle for your special needs child. Do not attempt to craft these legal documents on your own, use existing forms, or copy some internet template. Each special needs child requires careful considerations that are unique to them and the challenges they face moving forward. With so much at stake, a qualified estate planning attorney with expertise in special needs planning will best suit your wishes and the child’s needs. Protecting public benefits such as Supplemental Security Income (SSI) and Medicaid and establishing a special needs trust through your estate planning can best achieve these goals. We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

Avoid These Mistakes When Planning for a Disabled Family Member

SchulzeLawGroup

Did you know the largest single minority in this country are the 58 million Americans five years of age or older that are identified as special needs? The majority of federal and state benefits available to help persons with disabilities are needs-based, meaning income and assets are strictly limited and can often be misinterpreted, resulting in costly mistakes.

One of the most common mistakes a parent or loved one makes is disinheriting their family member with special needs. The reason is often that the family believes other siblings will step in and take care of the disabled family member. However, this can lead to numerous problems, especially if the non-disabled sibling gets sued, divorced, or otherwise loses the money left to them.

Another common mistake is failing to create a properly drafted trust to qualify the disabled family member for government benefits that can help pay for costly medical and/or living expenses. Qualifications for government benefits like Supplemental Security Income (SSI) or Medicaid dictate that the disabled individual has no more than $2,000 in assets. If your disabled loved one has assets above this threshold, they will have to be “spent down” to qualify for government assistance or otherwise protected in a properly drafted trust.

Well-meaning friends and extended family may not understand the complexity of disability benefits and give a disabled loved one money or assets that would disqualify them for state and federal benefits. It is especially difficult if the disabled person already has benefits and becomes disqualified because the “needs-based” review discovered additional funding putting them over the $2,000 asset limit. It is best to avoid this situation as it is a big hassle to re-qualify your dependent for government assistance.

Be wary of crowdfunding sites like GoFundMe to benefit your loved one with special needs. In the absence of qualified legal planning, these donations can disqualify SSI, Medicaid, food stamps, and section 8 housing. A well-meaning fund campaign could cut the benefits of a disabled person and make their living circumstances worse than before. 

What to do? Plan ahead! There are several ways to provide for your special needs dependent and stay within government guidelines for additional benefits. One of the best ways is to establish a special needs trust that has the specific purpose of supplementing federal and state assistance programs. By doing so, a disabled loved one can benefit from government programs and have additional money to supplement what those programs provide.

There are strict rules when it comes to creating special needs trusts for a disabled family member. There are also restrictions on what the money can be used for. We can help you determine what type of trust is best based on you and your loved one’s particular circumstances. Give us a call at your convenience to set up a time to discuss your situation further. Please contact our Reno office by calling us at (775) 853-5700.