Estate Planning Isn’t Optional When a Loved One Has Special Needs
The Asset Limit Problem and Solution
For most families, estate planning is about deciding who gets what. For families with a special needs child or adult, it’s about something far more urgent, protecting benefits that took years to secure. Many government benefit programs that disabled individuals rely on, like SSI and Medicaid, impose strict limits on assets. These limits are often as low as $2,000. We all know that $2,000 in assets is not enough money for our loved one to live on much less afford the therapies, diets, technology, and equipment necessary for them to live their most independent lives.
An inheritance left outright, even a modest one, can trigger an automatic loss of government benefits. A life insurance payout can push a special needs person over that asset limit and trigger a loss of eligibility for government benefits. It is vital that you are careful with your plan and think about the future. A properly drafted estate plan with a Special Needs Trust allows the special needs person to enjoy the benefit of an inheritance without losing their crucial government benefits.
The answer to the asset problem is a Special Needs Trust. Rather than leaving assets directly to a special needs person, the parents, grandparents, and other family members can direct all inheritance into a Special Needs Trust. The Special Needs Trust is designed to supplement, rather than replace, your loved ones government benefits. Funds held in a properly structured Special Needs Trust are not counted as the special needs person’s own assets. Therefore, the Special Needs Trust can pay for things like extra therapies, education, recreation, technology, and a better quality of life, all without disqualifying the special needs person from SSI or Medicaid.
Estate Plan
Just as important as the Special Needs Trust, is a comprehensive estate plan (including a will, and often a revocable living trust) that can direct all inheritances around the Probate Court process entirely. Probate Court is a slow and public process that can leave a family without access to funds for months while a case works through the court. Probate Court is the last thing a family should have to navigate when navigating a difficult time. This is why having a plan is extremely important to ensure continuity of benefits for individuals with special needs.
The Special Needs Trust fits within the estate plan along with parents Wills, Trusts, and Powers of Attorney. While August is Make a Will month, which you should do if you have not already, it is important to recognize that a Will is only one part of a comprehensive estate plan. A will alone cannot protect the benefits of your loved ones nor can it shield you from probate court. Therefore it is necessary to create a comprehensive estate plan to ensure the protection of your assets and the wellbeing of your loved ones.
The final piece families often overlook is choosing who will manage the inheritance for the special needs person in their Special Needs Trust once the parents are no longer able. Often a sibling or other family member can be named as the successor trustee to decide how to manage and spend the funds for the special needs person’s benefit. There are also nonprofit organizations which specialize in acting as successor trustees for Special Needs people. This could be a good option for families who don't want to worry so much about the financial piece of the puzzle.
Common Questions
– Do I need to fund a Special Needs Trust when I create it?
No, the family does not need to fund the Special Needs Trust when they create it. The Special Needs Trust can stay empty for decades until it is time for the special needs person to receive an inheritance or life insurance proceeding.
– Do I need to be a certain age to start planning?
No, you can and should start planning today. The future is always unclear, so it is best to have a plan in place to make sure your loved ones are cared for in the way you want them to. Having a plan in place can provide protection for the future and peace of mind in the present.
– Can I leave money directly to my child with special needs?
You could but you should opt for the Special Needs Trust. This ensures you do not exceed the strict asset limit and can supplement your child’s needs where necessary. We all know that government benefits are essential to the wellbeing of our loved ones with special needs, so we must ensure their future retention.
– I don’t have a lot of money, should I still make an estate plan?
Yes! While the financial part of an estate plan is very important, there are other advantages to creating an estate plan. The estate plan can document care preferences, identify decision makers, and ensure well-being. A properly structured estate plan can allow your family peace of mind and ensure your wishes are documented.
To learn more about Estate Planning please check out the Connection Crew Podcast featuring Tim Hickey, Estate Planning Attorney:
YouTube: Connection Crew Podcast: Exploring the Importance of Making a Will & Estate Planning
Spotify: https://open.spotify.com/episode/5gubc98zg7y90835pwNFRU?si=FnywDq-SSDOhv0aLDffA2g
Below are some fantastic resources to learn more about the specifics of estate planning: