Special needs Estate Planning

Jenny specializes in special needs planning. She not only understandings the complexity of special needs planning, but also understands the challenges parents face as special needs parents. Jenny has two children with disabilities (age 21 and age 7). This personal perspective provides her a unique perspective in providing estate planning services. 

When you have a child with special needs, you worry about how your child will live independently and/or what the future will look like when you and your spouse are no longer living.  If your loved one (family member) is living with a disability, it is critical that you properly and adequately plan for his or her needs. McInerney Law understands these needs personally - firsthand - and provides a variety of tools to clients to ensure a full and thorough plan is in place.

What is Special Needs Planning?

Special needs planning is estate planning for individuals who have a family member of any age with a disability. Because the cost of care for a person with a disability is high, it is important for families to take advantage of all sources of funding available for that care-both public and private. Under current Social Security and Medicaid regulations, a direct gift or inheritance of over $2,000 to a person with a disability would make the person ineligible for important “means-tested” government benefits, such as Supplemental Security Income (“SSI”) and Medicaid. For this reason, an individual with a disability who either presently receives or may qualify later for these means-tested benefits (which could be the person’s only source of health care insurance), or who may participate in educational/vocational programs available only to those eligible for government benefits, should not receive an inheritance or gift outright or in a traditional trust. Instead, the inheritance or gift should be directed to a special type of trust called a special needs trust (“SNT”) that would not count for eligibility purposes for means-tested government benefits programs. Proper estate planning can ensure financial independence throughout the disabled individual’s lifetime.

 Who is a good candidate for Special Needs Planning? 

Individuals with any type or degree of physical, mental, or developmental disability can benefit from special needs planning. Anyone whose child has a disability potentially affecting his or her ability to support himself or herself or obtain his or her own medical insurance is a good candidate. Also, a person whose spouse or parent has developed a disability later in life should consider special needs planning to maximize sources of both public and private funding to provide a higher standard of care for a family member in need. An SNT becomes the vehicle by which a parent can provide for a child’s (or loved one’s) future cost of living and care giving arrangements and provide an effective way for other family members to give to the SNT for the child, all while keeping government benefits available for primary funding. Because current public benefit programs for persons with disabilities do not provide coverage for all of their basic living needs (such as dental care), it is critical to have a source of private funds to supplement these public sources.

 What kinds of estate planning options are available in Special Needs Planning?

Special needs planning options vary greatly. Each family’s goals, personal and financial situation must be considered in designing a personalized and effective plan. The SNT might be a separate document that could be funded during the parent’s lifetime, or it might be part of the parent’s will and established at death. Many parents of a special needs child will establish a separate SNT for the child and have a Will that directs the child’s inheritance to the SNT at the parent’s death. This kind of SNT is sometimes referred to as a “Third Party” SNT, since it is designed to only receive assets of persons other than the child. A grandparent or sibling or favorite aunt or uncle could make gifts to this trust during the parents’ lifetime. Often parents designate the SNT to receive life insurance or the beneficiary of investment accounts after their deaths. Some parents prefer to begin funding the SNT during their lifetimes, while others only fund it only after both parents are gone. For parents who do not anticipate gifts for the child from other family members, the SNT can be part of their Wills. Other considerations in special needs planning concern naming a support team for the beneficiary, naming a guardian and conservator for the child in the event of a parent’s death or incapacity, and possible gifts that would benefit both the child and a favorite charity.

“Jenny made the planning process enjoyable. She thought of things and situations I had never contemplated. I know my boys have a solid, complete, and well structured plan.”

Sophia Leece, Homewood, AL

 How do special needs trusts Work? 

Special needs trusts are irrevocable trusts that preserve the beneficiary’s eligibility for need-based government benefits because the trust—not the beneficiary—owns the assets. Such trusts can pay for quality-of-life expenses outside the scope of government assistance, such as education, entertainment, and travel, so long as the funds are used only for substantiated expenses not covered by government benefits. Once the trust is established, an EIN is assigned to the trust and it can begin receiving funds/gifts. Once the first gift is complete, spending on the beneficiary can begin. It is important to note that if the beneficiary is already receiving government benefits, the trustee shall notify the Social Security Administration of the new trust instrument and identify where the funds originated.

FAQs

  • Many individuals with a disability enjoy a typical life expectancy. Therefore, many will survive their parents and siblings. For this reason, it is important that families prepare a plan for the care and supervision of their loved one. Planning is not an option, it is a necessity.

    Futhermore, an individual who is receiving government needs-based benefits is at risk of losing those benefits if he/she receives an inheritance that exceeds $2,000.

  • No. Since the person with special needs cannot have more than $2,000 of assets in their name to qualify for certain government benefits, the Special Needs Trust is essential to hold and protect assets.

  • Yes, problems can arise that they will have no control over. Assets left to another person, legally belong to them. The assets are exposed to loss due to lawsuits, creditors, divorce and their death.

  • A detailed document known as the “Letter of Intent” is used. It provides information for future care providers such as daily needs and activities, diet, abilities and skills, medical care and your desires for the quality of life for your person with a disability

  • Anyone whom you feel you can trust to fulfill your wishes and provide the best care and attention for your loved one. A trustee must be chosen carefully with consideration for his or her age relative to that of the person with special needs, knowledge and empathy for the circumstances and a willingness to handle the decisions related to managing the trust.