Special needs children require special estate planning strategies.
If the newest addition to your family has special needs, your estate plan should be updated to plan specifically for his or her care.
The care your child needs will likely outlast your ability to provide for those needs due to your own incapacity or death.
How do you prepare for this inevitable situation?
As noted in a recent CNBC article, appropriately titled "Special-needs trust is key part of some estate plans," creating a special needs trust (also known as a supplemental needs trust) allows parents to assist a disabled child with care and financial support after the parents are no longer around.
Why would you want to include a special needs trust in your estate plan?
If you want to provide for your special needs child after you have died, you will need to leave them money for their needs.
But there is a catch.
Inheriting assets outright could jeopardize eligibility for Medicaid, Medicare and Supplemental Security Insurance. In fact, according to the aforementioned article, some public programs reject disabled applicants with as little as $2,000 in assets.
This is where a special needs trust comes in to play.
Assets held in these supplemental needs trusts are not counted when qualifying for public benefits.
If you choose to use a special needs trust, remember to inform any friends or relatives who would like to help provide for this child to leave funds to that trust and not directly to the child.
What makes a trust a special needs trust?
The funds in the trust are used to supplement what is covered under government programs such as dental work, glasses, or payment for caregivers. They can also be allocated to fund enrollment in special education programs or trips to visit family.
When would be a good time to set up a special needs trust?
Although you can create a supplemental needs trust at any time, many choose to do so once the child reaches adulthood and his or her capability for independence can be better determined.
Like any trust, a trustee needs to be named. Although this individual is obligated to follow trust guidelines and act in the best interest of the disabled beneficiary, you may want to choose a trustee who personally knows and cares for the child—often a family member.
Corporate trustees are also good options.
Most importantly, special needs trusts should be created by an experienced estate planning attorney. This will guarantee the care of your child after you are no longer able to do so yourself.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: CNBC (June 1, 2016) "Special-needs trust is key part of some estate plans"