Gabriel Katzner - March 27, 2020 - Estate Planning
Estate planning for a special needs child or grandchild is important.

From the moment of their birth, we all make plans to ensure that our children and grandchildren have a bright future. What will the child’s interests be? What job will they have? Who will they marry? And for a special needs child or grandchild, how can we make sure they have a safe, happy, and healthy future? To help provide a prosperous future for your special needs child or grandchild, consider these steps. 

Prepare a Special/Supplemental Needs Trust 

Establish a special or supplemental needs trust (SNT) for the benefit of your child or grandchild. An SNT is a special type of trust that sets aside money and property for a beneficiary who may qualify for public assistance for medical and other care expenses as a result of his or her disabilities. This type of trust can be added to an existing trust, or it can be drafted as a standalone trust. 

Because most government programs providing aid to disabled individuals place limits on how much money and property the person can own or receive on a regular basis, make sure that any inheritance your special needs child or grandchild receives is not structured in a way that will disqualify them from receiving the government benefits or subject their inheritance to reimbursement for government monies already received. Even if the child is not currently receiving benefits, they may receive them in the future. When planning ahead, we want to maximize all opportunities available to them, not limit those opportunities. To accomplish this, the trust should be drafted by an attorney who understands the eligibility requirements for government benefits.

In addition to providing for the child’s financial future, an SNT allows you to appoint a care manager or an advisory committee. Unlike a trustee who manages the money and property in the trust and makes distributions, the care manager acts as the child’s advocate. Depending upon the level of care the child needs, the care manager may only check on them periodically or may be responsible for their day-to-day care. The care manager may also serve as part of an advisory committee made up of multiple friends, family, or professionals. As an advocate, the care manager or advisory committee can advise the trustee about the beneficiary’s needs and the best ways to use the funds.

An SNT can include a statement of intent that informs the trustee, and sometimes the court, as to why the trust was established and how the trust funds should be used. Including this section in the SNT can act as a safety net should there be a change in the law causing the special needs beneficiary to become ineligible for government benefits. If you include a statement of intent, it can be easier to change the trust to ensure that your original objective is carried out if circumstances change after you have passed away. 

Write Down Your Instructions

In addition to creating an SNT, write a letter or memorandum of intent to instruct your chosen trustee about what is to happen after you have passed. Although this document is not legally binding, it can help your trustee understand your true intentions. You can explain what you want the money to be used for, milestones you would like to see the beneficiary achieve, and the standard of living you would like the beneficiary to have.

Consider Life Insurance 

Supporting a special needs child can be expensive. Not everyone has enough of a nest egg to continue covering these expenses for their child once they have passed away. By purchasing life insurance and naming the SNT as the beneficiary, you can guarantee that there will be sufficient money at the trustee’s disposal to care for the child after you’re gone. Life insurance can be paid out as a lump sum and does not have the same income tax liabilities as retirement accounts.

Review Your Retirement Accounts

The SECURE Act means beneficiaries have lost the ability to stretch distributions from an inherited IRA over their lifetimes. However, Congress created a new class of beneficiaries called “eligible designated beneficiaries,” which includes disabled beneficiaries. These beneficiaries retain the ability to receive distributions over their life expectancies, reducing the amount of income tax due when those distributions are made. Congress also passed additional rules allowing the disabled beneficiary’s life expectancy to be used for certain types of trusts. If you have a large retirement account, it is very important that we meet to discuss ways this money can be distributed after your death to maximize its benefits to all of your beneficiaries.

Contact Us Today

Ensuring that your special needs child is cared for after you are gone is probably your top priority. We can help you craft a plan that will ensure continued support and prosperity for him or her. Contact us today for an appointment.

You can schedule a call with us or reach us directly at 855.528.9637 to learn more about how best to plan today to protect those most important to you.

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