Special Needs Estate Planning focuses on providing for the special needs of our loved ones with disabilities when we are no longer there to organize and advocate on their behalf. Spouses need consider Special Needs Planning for each other for needs arising during their lifetime or following the first to die. Parents of children with special needs must make careful estate planning choices to coordinate all of the legal, financial, and special care needs of their children – both now and in the future.
There are several types of trusts to assist with these special planning challenges. The most common types are Support Trusts and Special Needs Trusts (also known as Supplemental Needs Trusts).
Support Trusts: Support Trusts require the Trustee to make distributions for the child's or incapacitated spouse’s support in areas like food, shelter, clothing, medical care, and educational services. Beneficiaries of Support Trusts are not eligible to receive financial assistance through Supplemental Security Income (SSI) or Medicaid. If your child or the incapacitated spouse will require SSI or Medicaid, you should avoid a Support Trust.
Special Needs Trusts: For many parents and souses, a Special Needs Trust is the most effective way to help their child or spouse with a disability. A Special Needs Trust manages resources while also maintaining the child's or spouse’s eligibility for public assistance benefits.
There are two types of Special Needs Trusts:
Third-Party Special Needs Trust: Are Trusts Created using the assets of anyone other than the disabled individual either by inter vivos (during lifetime) funding or as part of an estate plan; distributed by a Will or Living Trust.
Self-Settled Special Needs Trust: Can be created by a disabled individual with legal capacity, a parent, grandparent or legal guardian using the individual's assets to fund the Trust (e.g., when the individual receives a settlement from a personal injury lawsuit and will require lifelong care). If assets remain in the Trust after the child’s death, a payback to the state is required, but only to the extent the child receives public assistance benefits.
Special Needs Trusts are a critical component of your estate planning if you have loved ones with disabilities for whom you wish to provide after your passing. Generally, Special Needs Trusts are either stand-alone trusts funded with separate assets (like life insurance) or they can be sub-trusts in existing living trusts. Many Grandparents find this to be an important part of their estate planning.
Planning for your loved one with special needs requires extensive research to become a well-educated advocate. You will want to keep up-to-date on the latest medical, educational, financial, and legal changes. Gregorek and Associates, PLLC provides assistance to you and your family in addressing your unique concerns. We can provide you with resource materials to help you manage a Special Needs Trust including: