Special Needs Planning: Gifting and Future Care Considerations
Planning for family members with special needs addresses present and future needs, including planning for the disabled adult’s life after their parents have died.
The process begins with an overview of the child’s current status concerning government benefits and the family’s ability to provide additional support. This must be done carefully, since means-tested benefits will be at risk if assets are transferred or inherited.
What is a Special Needs Trust?
A Special Needs Trust (SNT) places assets into a trust benefiting the child, while preserving their eligibility for government benefits, like Medicaid and Supplemental Security Income (SSI). The child doesn’t own the assets in the trust, so they remain eligible. Acceptable uses of funds from an SNT are expenses not covered by government benefits, including medical and dental care, transportation and other things adding to the quality of their life. There are two basic types of SNT: the first party SNT, funded with assets or income belonging to the child with special needs, and a third-party SNT, funded with assets from another person. If possible, an SNT should be set up before the child turns 18, and you should become familiar with the rules and restrictions.
Achieving a Better Life Experience (ABLE) Accounts
ABLE accounts are similar to College Savings 529 Accounts. However, they are for disabled individuals as long as the disabled condition begins before age 26. Funds from an SNT can be moved into an ABLE account and used for any qualifying disability expense. The disabled individual can manage the ABLE account, although the parent can limit how much can be spent at any time.
Parent’s Own Estate Plan Impacts Their Loved One
Parents of a child with special needs must ensure that their estate planning is in order. In most states, if the child is a minor, their parents must nominate a guardian under their last will. This guardian should be someone they trust to raise and care for their child. Parents must be careful not to leave any assets outright to a disabled child, since this will disqualify the child from means-tested government benefits.
When the disabled child reaches legal age, their parents must apply for guardianship to continue to help their child. Obtaining guardianship allows the parent to continue to speak with healthcare providers, make medical decisions, manage the child’s finances and make important decisions regarding their care.
Creating a Letter of Intent
Parents should also create a “letter of intent” concerning their child as part of their plan for the future. This document provides as much detail as possible about their child, including their functional abilities, routines, likes and dislikes and all information only a parent knows. A letter of intent should be updated every few years to stay current with the child’s life.
Plan for Future Housing Needs
If a child with special needs lives at home, the parents can leave the house to the child in an SNT. However, the SNT must be well-funded to cover the cost of upkeep, property taxes, etc. Another option would be to purchase a coop or condo apartment, which would be held in the SNT.
Planning and Peace of Mind
Planning for the future of a child with special needs, regardless of their age, requires looking at short and long-term challenges to achieve the family’s goal—securing the future for your loved one.
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