Posts tagged ‘child with special needs’
Considering a special needs trust.
With a special needs trust (otherwise known as a supplemental needs trust), you can plan for the future financial security of your child with special needs. This estate planning tool is very effective in creating a clear course for directing, protecting and preserving assets that can be used to provide for the financial security of a disabled child, regardless of age.
To create a plan that is truly protected and thus provides the greatest security, it is important to consult with an attorney experienced in this area of the law. One major goal of such a trust is to protect the trust assets from creditors of the beneficiary (the child with special needs), and to insure that the trust assets are excluded from consideration for needs-based aid and programs a child might otherwise be entitled to (such as Medicaid and Social Security benefits). An improperly-formed trust won’t provide these protections.
Before engaging in the trust planning process, I suggest a family should consider the following issues – discuss your thoughts and feelings with each other, consult with your financial advisors, and raise these matters with your legal counsel:
•If you have more than one child, consider the division of assets among the children – a simple, equal division is not always ideal, especially if one child has special needs. The type of assets in question can also lead to a division other than in equal parts.
•Research and understand the difference between government assistance programs that may be available to your child with special needs – Medicare, Medicaid, Social Security Disability Income and Supplemental Security Income, for example.
•Review all beneficiary designations (e.g. life insurance contracts) to insure that no assets/resources pass directly to the child with special needs.
•Consult with your insurance agent to determine if a second-to-die life insurance policy is an appropriate and cost-effective way to fund a special needs trust.
•Consult with your financial advisor if using retirement accounts to fund a special needs trust – these must be structured properly in order to avoid negatively affecting a disabled child’s ability to qualify for needs-based aid.
•Create an estate plan that protects assets left for the benefit of a child with special needs. Such a plan could, and probably should, include the following:
1•a special needs trust, which is funded by parents’ assets, and which won’t be included in an asset calculation for needs-based aid if properly drafted
2•carefully choose a trustee of the special needs trust, and draft a supplemental letter to the trustee, to assist the trustee in carrying out his/her duties on behalf of your child
3•parents’ powers of attorney should permit the designated agent to make discretionary, non-support distributions to or for the benefit of a child with special needs
4•include contingent special needs provisions in all estate planning documents
Creating an effective special needs trust doesn’t require great complication or expense, but it must be drawn properly in order to achieve the desired effect. Understanding the relevant variables and carefully considering your planning choices is the first step.
For a basic overview of this topic, you can visit the following link to Justia’s article on the topic: http://www.justia.com/estate-planning/special-needs-trusts/.
