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Planning for Special Needs Children in Your Estate Plan

by Ellen Li, MSBA, CFP® on 7/22/2016

If you have children or grandchildren with special needs, whether they were born with congenital defects or develop disabilities through accident or disease, you should consult with your estate planner and financial advisor to protect the future of these children.

What to alter in estate planning when there is special needs child involved?

In most cases, it is essential to create a special needs trust to provide ongoing care and financial support for the special needs child throughout his/her lifetime.

More importantly, a special needs trust can avoid disqualifying the child’s eligibility for any means-tested government benefits such as Medicaid, Medicare, and Supplemental Social Security Income. Because the government says that a disabled individual with as little as $2,000 in available assets may be considered too affluent to be eligible for public benefits, you will do a disservice to the child if you name him/her as an IRA account beneficiary, or in your family trust directly.

However, if the assets are held in a special needs trust, managed by assigned trustee, those assets aren’t considered by the government for calculations for public benefits.  This makes it possible to leave your special needs child/grandchildren a sizable portion of your estate without jeopardizing his/her public benefit income.

What about Social Security Disability benefits?

You may have noticed that we listed Medicaid, Medicare, and Supplemental Social Security Income as benefits that are subject to means-testing by the government. Social Security disability benefits is not the same; a person can be rich or poor and qualify for it. In other words, a special needs trust may not be needed in this instance unless there are other reasons for it.

What can the beneficiary use funds in the trust for?

Your beneficiary can use monies in the trust to pay for many things that government benefits don’t cover such as:

  • Medication and devices – eyeglasses, hearing aids, and prosthetic devices.
  • Medical services- dental work, eye exams, hearing exams.
  • Assisted technology- Ipads, computers, speech synthesizers.
  • Haircuts
  • Transportation
  • Caregiver fees
  • Recreational activities
  • Family visits
  • Educational or enrichment programs

In general, the trust may significantly enhance the quality of life for your beneficiaries.

Words of Caution

Because there are so many financial and personal decisions to be made in planning for the future of a special needs child, it is crucial to have the assistance of an experienced estate planning attorney as well as a qualified financial advisor.

posted in BlogPersonal Finance

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Posts are general in nature and do not constitute the rendering of legal, investment, accounting or other professional advice.