Special Needs Planning

This blog article discusses “Planning for Special Needs Child”. Raising a Child is the most significant experience of one’s life. Parenting is difficult, but one with many blessings. Replacing the primary caregiver or parent is an impossible task especially for a special need’s child. A Special needs child represents almost 19 percent of all children. See https://www.masters-in-special-education.com/special-needs/

Wikipedia summarizes that “special needs describes individuals that require assistance for disabilities that may be medical, mental or psychological. See Wikipedia. Special needs are a general term that describes conditions from mild to severe such as the following:

• Developmental Delays
• Medical Conditions
• Psychiatric Conditions
• Congenital Conditions

Parenting a special needs child is difficult and parents of a disabled child or adult find co-parenting challenging at best.  Parents find services, gain understanding of their child, and set-up parenting in the best interest of the special needs’ child.

See https://www.verywellfamily.com/what-are-special-needs-3106002

According to Autism Speaks, raising an autistic child costs approximately $60,000 per year. Planning for a Special Needs’ Child is a costly endeavor especially after the loss of a primary caregiver. According to the Special Needs Alliance, planning for a special need’s child requires skills and care.  Often, a Special Needs’ Child will receive public assistance benefits such as SSI or Medicaid. Extreme care should exercise to maintain these public assistance benefits upon an inheritance. A major purpose in special needs’ estate planning is to preserve public benefits for the special needs’ child. https://www.specialneedsalliance.org/blog/estate-planning-for-families-with-special-needs-children-2/

DISINHERITING A SPECIAL NEEDS CHILD IS UNWISE

One of the panelists at a recent seminar for the National Business Institute gave an example of how a mother left an inheritance through her last will and testament to her two adult children and disinherited the disabled adult child requiring special needs.  A Last Will and Testament must undergo the probate process where heirs can challenge the validity of a Last Will and Testament.  Moreover, notices must be given to heirs and legatees.

Under this example, guardian ad litem was appointed by the probate court.  Guardian ad litem is a probate attorney for a disabled adult or minor child.  Guardian ad litem represents the interests of the wards, which cannot adequately represent themselves.  Probate courts give special care and attention to the interests of a disabled adult or minor child (or special needs child). 

At our recent panel, one of the attorneys told a story about how guardian ad litem was appointed by the court.  The State had significant interests in this case as well because the disabled adults would be wards of the state.  Wards of the state require great public financial assistance.

Guardian ad litem was appointed for the special needs child and a strong consideration was given to challenging the last will and testament.  Second, the State and public policy discourages public assistance providing for a disabled adult when there are available financial assets to provide for adult care.  Thus, estate litigation and unforeseen consequences occur, which makes disinheriting a special needs child a bad decision.  In this case, there was a happy ending and the State agreed to allow the special needs child to set up a Special Needs Trust.

In addition to estate litigation, the adult children of the special need’s child could face a divorce proceeding or a creditor action threatening the adult special needs financial means. At a minimum, a divorce proceeding could significantly deplete a special needs child’s asset. Placing a special needs child’s asset in another sibling’s household is an exceptionally bad idea.

THIRD-PARTY SUPPLEMENT NEEDS TRUSTS

One of the primary purposes of a Supplemental Needs Trust or otherwise known as a “Third-Party Supplemental Needs Trust” is to safeguard a special need child’s money especially the federal government. The benefit of a Supplemental Needs Trust is to protect a Special Need’s Child’s ability to maintain their public benefits. 

Inheriting money and assets threatens a special need children’s ability to maintain public benefits such as Medicaid or SSI. A Special Needs Trust is set up by a third-party such as a parent, uncle, aunt, sister, brother, or another third-party for the benefit of a special need’s child or disabled adult. Typically, the third-party sets up the Special Needs Trust through their Will or Living Trust or otherwise known as an “Inter Vivos Trust”. On the alternative, a Supplemental Needs Trust may be set-up as a standalone trust.

One drawback to setting up a Supplemental Needs Trust through one’s Last Will and Testament is that it is not set-up until the person dies. A standalone Supplemental Needs Trust is beneficial because any family need can leave an inheritance to the Supplemental Needs Trust. The Special Needs Trust has a name such as the “Jane Smith Supplemental Needs Trust”. Hence, a Standalone Supplemental Needs Trust can be utilized by multiple donors to increase the funding of the Standalone Supplemental Needs Trust. Different family members can provide gifts to the Standalone Supplemental Needs Trust during their lifetime unlike a Supplemental Needs Trust created upon one’s death (and funded at that time).

Generally, funding of the Supplemental Special Needs Trust is done through a life insurance policy or otherwise assets. Supplemental Special Needs Trust is utilized to supplement the government benefits such as Medicaid or SSI that a disabled adult receives. The biggest difference between a Supplemental Special Needs Trust and a Self-Settled Special Needs Trust is the ability to distribute assets to a contingent beneficiary upon the death of the disabled adult. A Self-Settled Special Needs Trust must go back to the government and cannot distribute any assets to a contingent beneficiary until the government has been paid back in full. In contrast, a Third-Party Special Needs Trust is used to supplemental government benefits and the government does not have to be paid back. Thus, the Third-Party Supplemental Needs Trust has full power and control over the money in the Supplemental Needs Trust unlike the Self-Settled Special Needs Trust.