You are reading The Voice, a newsletter published by The Special Needs Alliance. Our purpose is to provide information–and answers–about special needs planning for family members and professionals. We hope this newsletter helps you. We would love to hear your questions, suggestions and comments; please feel free to e-mail us. We also encourage you to forward our newsletter to others who might benefit from the information here, or who might have similar questions.
Introduction: Families with special needs children must exercise extra care in making their estate plans. This is true whether their special needs child is still a minor or now an adult, and particularly so when the child is or in the foreseeable future will be — receiving needs-based public benefits such as SSI or Medicaid. While planning considerations for such a child will vary depending upon the child s age, competency, and other family considerations, the goal is always the same: parents want their estates utilized to enhance and enrich the life of their special needs child while maintaining the child s enrollment in essential public benefits programs. These goals can be met through the use of a properly prepared special needs trust.
The essence of all special needs estate planning is to ensure that the portion of the parents estate which passes to their special needs child at the time of their death is not considered an available asset, as defined by public benefit agencies. Parents must be mindful of both income and principal, as too much monthly income, as well as too much cash, can negatively impact their child s future eligibility for benefits.
Purpose: Special needs planning works to preserve public benefits for the disabled child while supplementing and enhancing the quality of the child s life. This type of planning is useful for many different purposes, including
Planning Options: The options available to families in making an estate plan for a special needs child who is receiving needs-based public benefits include the following:
During Life or at Death? Families have the option of creating a Special Needs Trust at their death by incorporating a trust within a Last Will and Testament this is called a testamentary trust.
The other option is for the parents to create a Special Needs Trust while alive — not surprisingly, this is often referred to as a living trust (or inter vivos trust). The advantages of the living trust include:
Revocable or Irrevocable? Tax considerations come into play in the decision to make the Special Needs Trust either revocable or irrevocable. Generally speaking, the family will make the trust revocable whenever:
Correspondingly, the use of an irrevocable trust may be appropriate when the family is concerned with:
Tax planning is beyond the scope of this article, so be sure to consult with your attorney, CPA or financial advisor if there are any special tax considerations in the creation of your Special Needs Trust.
Selecting Your Trustee: The Trustee will be responsible for administering your Special Needs Trust. So selecting your Trustee is one of the most important decisions your family will make in ensuring the long-term success of your Special Needs Trust. Given the natural pressures inherent in all families, someone in your family may consider the funds in the Special Needs Trust as their money, rather than the money of your special needs child. This can be a dangerous situation, especially as to your child s continued eligibility for public benefits. In most families, it is best to consider selecting an independent, non-family member to serve as your Special Needs Trustee. The range of options includes:
The selection of any of these potential Trustees has both advantages and disadvantages. You should closely counsel with your attorney or financial advisor before making your Trustee selection.
Conclusion: This brief summary is just the start of your enquiry as you begin your special needs estate plan. By working closely with your attorney, your CPA, and your financial planner, you will develop a much greater understanding of the options available to you and your family in making an appropriate estate plan for your special needs child. After making your wishes known and getting the appropriate documents in place, you will have taken crucial steps in assuring that this child will receive proper care when you are no longer able to provide that care yourself.
About the Author: James M. O Reilly is a Certified Elder Law Attorney in Las Vegas, Nevada, whose practice focuses on special needs planning, elder law and estate planning. Mr. O Reilly is a member of the Special Needs Alliance, a non-profit organization dedicated to serving the legal planning needs of people with disabilities and their families. Contact information for a member in your state may be obtained by calling toll-free (877) 572-8472, or by visiting www.specialneedsalliance.com.
About this Newsletter: We hope you find this newsletter useful and informative, but it is not the same as legal counsel. A free newsletter is ultimately worth everything it costs you; you rely on it at your own risk. Good legal advice includes a review of all of the facts of your situation, including many that may at first blush seem to you not to matter. The plan it generates is sensitive to your goals and wishes while taking into account a whole panoply of laws, rules and practices, many not published. That is what The Special Needs Alliance is all about. Contact information for a member in your state may be obtained by visiting the Special Needs Alliance online.
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