Estate planning for a loved one with special needs can be challenging. Sometimes we know a trust is the best and only sensible way to provide needed protection. It is easier to plan when we know a family member will always depend on public benefits for good care and needed services, or when he or she has a disability that meets the necessary criteria to receive disability benefits. Perhaps he or she suffers from a physical limitation, mental illness, an emotional disturbance, or some other impairment preventing him or her from earning a living. In these cases, a special needs trust is the logical way to improve quality of life.
We should carefully consider the individual needs, skills and abilities of persons for whom we are planning. Even if we are not anticipating a lifetime need for public benefits, if a family member will never have the skills to properly manage his or her assets, a trust is a wonderful solution. Perhaps he or she is vulnerable to exploitation, or lacks good judgment in selecting a spouse. A well-drafted trust would be the answer.
What about a loved one whose future needs and skills are uncertain? Perhaps your child has a disability, but still functions fairly well now. Public benefits may be in his future, but you simply do not know at this time. He may develop asset management skills. But we must decide whether to have a special needs trust in place, because of the uncertainties.
You might choose to delay estate planning because of the unknowns. One option is to wait and see. But depending on your age, health, the size and nature of your estate, and your own comfort levels about not having a plan in place, delaying might not be such a good idea. Perhaps we can plan later, but perhaps we won’t have the opportunity. Most of us understand the risk of waiting to see how a loved one progresses before implementing an estate plan.
Where there is uncertainty, it is essential to get advice from an attorney with considerable experience in special needs planning. Working with that attorney, you will want to ensure there is flexibility to change the plan at a later date. You may want to implement a trust providing a well-drafted provision allowing for later modification or termination, in case the situation changes. Inclusion of these provisions may impact public benefits differently in different states, making it important to consider the effect of future moves (either yours, or your child’s). It is critical to get advice from a special needs attorney in the current state of residence of the individual for whom one is planning; your local attorney should have contacts in those states where your child resides or might reside after your own death or disability.
You might choose to create an unfunded special needs trust to receive assets to provide for a person in this middle ground, and (using beneficiary designations and your own will or trust) direct those assets passing to him be placed in the special needs trust. If we develop confidence that a trust will be unnecessary, we can later change our plan and not direct assets to the trust. The advantage is protection for the individual and assets to be passed on, if such protection turns out to be needed. An attorney with expertise in designing special needs trusts can customize a trust providing as much flexibility as possible in managing and using assets held in trust, in the event the individual ends up doing well and therefore doesn’t qualify for disability benefits.
Another option is to create a special needs trust to receive assets otherwise passing to any individual eligible for public benefits at the time of one’s death, rather than naming a specific individual at the time your estate plan is drafted. This will allow flexibility, depending on future needs and disability status, and should allow any beneficiary who is disabled at the time to still qualify for Medicaid, Supplemental Security Income and other benefits programs.
Special needs planning is an evolving, specialized area of the law. Current law, regulations, and government policies must be considered. When dealing with the uncertain future needs of loved ones, tapping into specialized knowledge and skill is all the more essential. An appropriate solution depends on the unique circumstances of the individuals involved.
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 calling toll-free (877) 572-8472, or by visiting www.specialneedsalliance.org.