Special Needs Planning for a Loved One
Do you have a family member with special needs or know someone who does? If yes, then you need to know about special needs estate planning. Its focuses on two issues: protecting disabled a loved one with special needs during his or her lifetime and securing protection when primary caregivers, usually parents, are no longer available because of incapacity, illness, or death.
Plan now to be sure your loved one will be well cared for in the future.
Several key steps need to be taken to ensure that a disabled family member remains eligible for means-tested government programs, like Medicaid and Supplemental Security Insurance (SSI). A small inheritance or a judgment from a personal injury case could jeopardize eligibility.
What is a Special Needs Trust?
Special Needs Trusts (SNT) are used to provide additional funds without compromising eligibility. The assets are owned by the trust, not the beneficiary with special needs. The trust makers, usually the parents, should appoint secondary trustees to manage the trust after they have passed. The goal is to “supplement” government benefits, not “supplant” them. For example, the SNT can provide funding for a specially equipped van or wheelchair, recreation and entertainment, medical and dental expenses not covered by other benefits.
A certain level of protection needs to be created to prevent or discourage anyone from exploiting disabled individuals. This can be achieved by placing available assets in a SNT and ensuring that the trustee selected is responsible and vigilant. Because the rules governing eligibility are very strict and eligibility is subject to ongoing scrutiny, a professional trustee may be an appropriate fit.
What is an ABLE Account?
ABLE Accounts (Achieving a Better Life Experience) are tax-advantaged savings accounts for individuals with disabilities and their families, similar to college savings accounts. The beneficiary of the account is the account owner and income earned is not taxed. Contributions can be made by anyone, must be made using post-tax dollars and are not tax deductible. The funds can be used for any qualifying expenses for costs not covered by insurance, Medicaid, or Medicare.
Using Advance Directives for Disabled Adult Children
Once a child turns age 18, parents lose legal standing to make decisions about health care and finances. One way to maintain control is for parents to encourage their newly minted adult sign Advance Directives, including Powers of Attorney and Healthcare Powers of Attorney. These documents allow parents to continue to be involved in the individual’s healthcare and finances.
Do You Need a Guardianship?
In other circumstances, a guardianship is necessary. Guardianships are more restrictive than Advance Directives. All decisions are made by the guardian, to include where the person lives, with whom they socialize, where they work, what type of medical care they receive and more. In addition, all financial matters are handled solely by the guardian. A guardianship should be customized to suit the individual and family circumstances.
The parent’s last will and testament needs to be crafted differently when the family includes a disabled individual. The family would be wise not to rely on siblings to do the right thing and leave all of their assets to their able children. Any assets intended for the disabled family member should instead go into the SNT, so they can be used as needed under the supervision of the trustee.
Why is a Letter of Intent so Important?
A letter of intent for a person with special needs is a significant help for future caregivers. Use this letter to share the lifetime of knowledge you have about your child’s likes, dislikes, routines, interests, food preferences, family members and friends. While this is not a legal document, it is important to help maintain stability when parents are no longer around to provide loving care and support.
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