By : Dwight | Category : Dwight Edward Tompkins, estate planning lawyer orange county, estate plans, special needs, special needs estate planning, special needs planning, Special Needs Trusts, Special Needs Trusts. Trusts | Comments Off on ESTATE PLANNIING FOR SPECIAL-NEEDS CHILDREN – 4 Unique Challenges
21st Sep 2016
Estate planning by parents for a special-needs child presents unique challenges.
Parents have to be aware of them and what their options are for managing them. Otherwise, they could find that they are making common errors which endanger the child’s financial security and overall well-being.
Essentially there are 4 realities parents must embrace. And then they must select the best options for their particular circumstances. There are many strategies they can consider. And as the worlds of financial and legal matters keep changing, more become available periodically.
Beginning the planning process early. Mortality is not a pleasant issue. Many sensible human beings drag their feet on starting any planning associated with what will happen after they pass on. That can range from making a will to creating end of life medical directives.
However, parents of disabled children do not have the luxury of ignoring the inevitability of their own deaths. They need to put in place the financial and legal provisions which will protect their child’s interests after they are gone. Usually, in this fast-based world with so much stress, they cannot depend on the altruism of other family members to be totally attentive to what is in the best interests of the child. That applies when the disabled is a minor and when an adult.
Therefore, parents should make it their priority to focus on estate planning now. Otherwise they are leaving the special needs child’s future to fate. It is possible that parents could die unexpectedly. They could also experience a medical episode in which they are rendered incompetent to make financial decisions.
The estate planning process for a special needs child is complex. That means it will take the parents’ time. In addition, it tends to be a work-in-progress. The specifics could change as circumstances change. Of course, that means there is no excuse for “putting off” this important task until X or Y date. Now is exactly the right time to search for an estate planner.
Not jeopardizing the child’s government benefits. Many of those with special needs receive means-tested government benefits. The major ones are Supplemental Social Security (SSI) and Medicaid. If they are found to have income or assets above a certain level, those benefits can be reduced or even eliminated.
The means-test is a critical issue, especially when it comes to Medicaid. Given the high cost of medical care, most of those with special needs require that kind of comprehensive coverage. Even a well-to-do family might not be able to afford to pay those kinds of medical bills through their own insurance and financial resources.
Yet, well-intentioned parents, grandparents, other relatives, and friends can make the critical mistake of willing an inheritance to the special needs person in a way that makes them ineligible for SSI and Medicare.
The good news is this: The “supplemental –needs-trust” (SNT) is structured to allow the beneficiary to use the assets held in trust. Yet those monetary funds and property will not be factored into eligibility for government benefits.
In addition the SNT is administered by a third party as trustee. Parents have the opportunity to be prudent in choosing the particular trustee. Often a family member is not the best selection. Estate planners not only can establish the SNT. They can make recommendations about the kind of trustee who would be the best to manage the SNT.
Not attempting legal shortcuts. There could be the temptation to simplify the planning process by taking what are known as “legal shortcuts.” Often they are the platform for disaster.
One is to assign property such as the parents’ home or rental units to a family member responsible for the future care of the child. However, that is not legally enforceable. Parents must recognize the dark side of human nature. Also, if those family members encounter their own financial problems their creditors could take possession of the property.
Another is to disinherit the child. That initiative is taken to supposedly ensure the disabled life-long access to government benefits. However, there is no guarantee that the child will always be eligible for government entitlements and at the current level. Regarding the latter, disabilities often are periodically assessed. Based on the findings, the monthly stipend can be reduced – or even discontinued.
Ensuring “equal treatment” for all siblings. Family members who develop resentments about their share of an inheritance are unlikely to be fully loving and generous toward the one with special needs. Estate planners can discuss approaches to guarantee fair treatment for all, without shortchanging the disabled. One strategy is for parents to will equal portions of their monetary funds and other assets to each sibling. Then they use life insurance to provide funds for the SNT.
Parents of a special needs child who begin the estate planning process probably will receive the gift of peace of mind. Being able to bestow that blessing is one of the intangible satisfactions of being an estate planner.
Protect your rights and assets by calling the California estate planning attorney you need directly at 1-714-385-0044 to schedule a consultation or email me.