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Special needs planning is a unique practice area dedicated to addressing the many challenges that a person with a disability face. While estate planning is necessary for everyone, it is especially important when you have a child or other family member with special needs. Families are often so busy with caring for their loved one today, that they fail to plan for their future care. It is critical to ask yourself, “Who will care for them if/when I’m no longer able to do so?”
Many parents and family members are, understandably, unaware of the care needed or what type of benefits they will be eligible for once they turn 18. Effective planning by parents can make all the difference in the life of a disabled person or that of a sibling who might be left with the overall responsibility of caregiving for a family member and/or aging parents.
As most individuals with a special needs’ family member know, their situation is no longer unique. One in ten families in the United States have a child or loved one with special needs. US Census data indicates that 2.8 million school-aged children (over 5%) have a disability as defined by the Individuals with Disabilities Education Act. The number of Americans living with a disability that impacts major life activities has steadily increased to roughly 1 in 4 adults and 2 in 5 people over the age of 65.
A special needs trust is a specialized legal document designed to benefit or care for the long-term needs of the person with a disability. There are two primary reasons for a special needs trust. One is to keep the assets to benefit your loved one from being counted as his or her own assets, which can disqualify them from government assistance such as SSI, subsidized housing (HUD), and or vocational rehabilitation benefits. The second reason is the ability to provide supplemental care over and above what the government provides. Such costs could include dental care, insurance, education, therapy, essential equipment, and other basic costs of living expenses. Your loved one will have a good quality of life and will never be alone because the trust can provide for caregivers for the life of the disabled.
While special needs trusts can be written into a will or revocable trust, mostly, they are a separate document. This allows for family and friends to contribute directly to the trust or allow the specific name trust to be included in their own estate plans. The stand-alone trust also allows for more flexibility allowing gifts either through survivorship or second to die life insurance policies.
If the government is providing for the disabled person’s needs, the trust’s distributions will be limited. If, however, the parents have sufficient assets and prefer not to have their child receive government benefits, they can set aside enough to cover all the child’s living expenses inside the trust. The trust can be a discretionary trust that will distribute income and principal at a trustee’s discretion to benefit the child during their lifetime.
It is sometimes advisable for an independent professional Trustee, like an attorney, CPA, or Trust Company, to act as a Trustee or Successor Trustee to a Special Needs Trust. Because family dynamics are often so complicated, it is sometimes in the best interest of the special needs individual to have an independent person act as the Trustee or Successor Trustee of a Special Needs Trust.
This way, not only can the family do what they do best, i.e., love the individual with special needs, but you can better ensure that the trust will be followed and that the Trustee will act independently of any internal family complications.
One way to be clear about what you intend for your loved one is to write a “Letter of Intent” to be given to the Trustee at the time of your death. This letter informs family members and others about your knowledge of the loved one’s situation along with instructions for caregivers.
When someone turns 18, they become an adult and are expected to make the right to decide about their medical treatment, finances, and life. To make these decisions binding (in a legal sense), the person should be competent to understand the decision being made and the consequences of that decision.
Guardianship is a legal proceeding in which someone (usually a family member) asks the court to find that a person cannot manage his or her affairs effectively because of a disability. A guardian steps in the shoes of the person with a disability and decides for them.
The process to set up a guardianship can be long and expensive and is not a decision to be taken lightly. Different types of guardianship depend on the person’s needs. Generally, there is a guardian of the person and guardian of the property and one person can serve as both.
A guardian of the person can decide about a person’s healthcare, housing, food, clothing, and other subjects that affect the person.
A guardian of the property decides about a person’s money, income, property, public benefits, and other financial matters.
Any person 18 years of age or older may be a guardian; the harder question is who should be the guardian. Often parents will petition the probate or surrogate court to be the guardians of their child and usually, the petition is granted. Sometimes the court will appoint one parent as guardian, other times both parents will be appointed as co-guardians. Sometimes where the parents of the child do not live together and cannot agree on who should be appointed as guardian, the proceedings may become contested, and the court will appoint an independent guardian. Likewise, if there are funds to be protected, the court may appoint an independent party to serve as the conservator if the family cannot agree on the appointment. In some states, mediators are available to help the parents resolve the issues rather than having a contested hearing, which can be expensive and take a long time. With the court’s priority being the best interests of the child, it will often choose an independent guardian or conservator if the parents cannot get along, which will leave both parents disappointed.
Parents should also try to name a successor guardian to serve after the parents have both died or can no longer care for the child.
SSI is income is paid to individuals determined to meet the definition of disabled as defined by the Social Security Administration. In 2020, the maximum federal benefit is $794/month per person. Usually, the disabled person does not have an employment history. To pass the “test,” the disabled can own little. They are limited to owning no more than $2,000 in assets, excluding a car and a home. Assets inside a third-party trust are not included. Gifts, cash, or inheritances received directly by the disabled must be reported to the Social Security Administration.
Patterned after 529 college savings plans, ABLE savings accounts are tax-advantaged state savings plans for individuals with disabilities. They can be used for “qualified disability expenses” – any expense related to the designated beneficiary because of living a life with disabilities. These may include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management, and administrative services, and other expenses which help improve health, independence, and/or quality of life.
Not all states are participating in ABLE programs, however, regardless of where you might live, you may enroll in any state’s program that accepts out-of-state residents.
More information, including a state-by-state comparison of programs, can be found on the ABLE National Resource Center website.
Caring and advocating for individuals with special needs is all about love and protection. Review your planning options with a special need’s attorney. Because special needs planning is so closely integrated with various aspects of retirement planning, estate planning, and often guardianship and conservatorship issues, it is imperative you speak with a qualified attorney experienced in this planning.
Financial Factors – Financial factors include mortgages and other expenses, insurance policies, investments, and savings.
Legal Factors – Legal factors include estate planning, weighing guardianship with less restrictive alternatives, and creating a Special Needs Trust to ensure a child’s future.
Government Factors – Government factors include identifying and supplementing government benefits, such as residential services, supported employment, and respite care.
Family and Support Factors – Family and support factors include family’s values, the parents’ careers, sibling considerations, and contributions of extended family members.
Emotional Factors – Emotional factors such as dealing with both positive and negative feelings, staying connected with others, and using strong emotions to fuel advocacy.
Lacking the proper guidance from an experienced special needs planning attorney, many families make critical mistakes in special needs planning, such as:
Our attorneys understand the pitfalls of special needs planning and can help you avoid mistakes.
Special needs family members are like any other family member – they deserve love and care. But it takes more planning and resources to properly care for special needs children or loved ones. If you need to engage in special needs planning, we are here to help. Contact us by phone at (301) 468-3220 or online to schedule a special needs planning consultation.
Altman & Associates is a member of the Academy of Special Needs Planners.
For more information, visit their Special Needs Answer site.