Families with any children need to take special care when estate planning, particularly if the children are still in their minority and would need guardians after the parents died. Dying intestate has a number of consequences that robust estate planning can easily avoid. This is true for families with any number of children, and even those with none.
If one of your children has special needs, managing your money after you pass away becomes even more crucial. Particularly if your special-needs loved one receives government benefits, making financial missteps with your estate could have catastrophic consequences.
What is at risk?
Persons with special needs require additional attention when creating estate plans. Of course, the specifics of the estate plan depend on the particular capabilities of the special needs individual in question. For instance, will your child require continued guardianship even once he or she reaches the age of majority? If so, this must be promptly addressed in your estate planning documents. You will need to have a number of difficult conversations with your child’s medical team as well as your other loved ones to make a comprehensive plan for what your child’s life might look like if you, or the other parent, are no longer around.
The role of a special needs trust is to improve the quality of life for your loved one with special needs while ensuring that they maintain access to vital support programs. For example, many persons with special needs have access to Supplemental Security Income (SSI). An unexpected inheritance or other influx of cash may remove your loved one from this program. This can be catastrophic even if your loved one is financially well-off because it is likely that your loved one relies on the Medicaid provisions that SSI offers.
What is the most common financial arrangement for special needs trusts?
Again, the specifics are individual to each situation. However, one of the more common special needs trust setups involve creating a revocable living trust for both parents and providing special provisions for managing the disabled child’s portion of the share. This share is typically put into an irrevocable special needs trust to preserve the disabled child’s inheritance without risking benefits from government programs like SSI.
This is particularly important if you have multiple children. You will need to ensure that you manage your special-needs child’s share of your estate differently, and it is highly likely that your non-special-needs children will have a different set of financial requirements and outlook as adults. Depending on how many children you have and the size of your estate, you may need to concoct a specific plan for all of your children.
In certain monetary circumstances, your special-needs child may require a self-settled special needs trust with payback provisions if applicable. However, the need for this typically only arises when your special-needs child receives money from a cash settlement rather than an inheritance. In these circumstances, it is common for the court to create the “self-settled” trust automatically.
Contact us today at AmeriEstate so we can talk in greater detail about your specific situation. Do not delay: secure your loved one’s futures as soon as possible.