If you have a disabled child, it is only natural to be concerned about the child’s future needs. Fortunately, it is possible to use a will and/or trust to provide for your disabled child in the event of your death.
The Importance of Estate Planning
Estate planning is an essential consideration for any family, but it is especially important for families with disabled or special needs children. Some of the goals of estate planning with a special needs child include:
- Making sure your child has an appropriate caregiver in the event of your death
- Providing financial support for your child in the event of your death
- Making sure that the assets left to your child don’t disqualify them from receiving public assistance, such as Medicaid
- Ensuring appropriate money management for the disabled child throughout
Protecting the Right to Public Assistance
Public assistance, such as Medicaid and SSI, can make a substantial difference in the well-being of a disabled child. However, these programs include strict income and asset requirements that can make it difficult for your child to inherit money from you without losing these benefits.
Estate planning attorneys can use several different strategies when dealing with the needs of a disabled child. While some of these strategies will protect the right to public assistance, others could have a negative impact. Available strategies include:
- Leaving the inheritance to other relatives – One strategy you may use to protect the right to public assistance is to leave money for the disabled child to other relatives, such as siblings. This approach does come with risks, as you must rely on someone else to use the money left behind for the right purpose. Claims against the person who receives the money can also cause problems. For example, if you leave assets to your disabled child’s sister, they will be vulnerable if she ever files bankruptcy, falls behind on credit card payments, or gets a divorce.
- Leaving the inheritance to the child directly – You always have the option of leaving an inheritance directly to your disabled child using a standard trust or will. However, the child may have reduced eligibility for public assistance, or they may lose eligibility altogether.
- Leaving no inheritance for the child – One of the easiest options is to leave no inheritance for the disabled child to ensure that they can still qualify for public assistance. However, this option makes it impossible for you to protect your child’s well-being after your death.
- Setting up a Special Needs Trust – If you are leaving more than a modest inheritance for your disabled child, a Special Needs Trust may be the best option. When used properly, this tool can help you pass on an inheritance for your child to improve the quality of their life without preventing them from using public assistance programs.
How to Use a Special Needs Trust
A Special Needs Trust is a specific type of trust arrangement that prevents your child from having full access to the assets you leave behind, making it easier for them to qualify for public assistance. When you place assets into a Special Needs Trust, they will be under the control of a designated trustee. The trustee will be subject to strict limitations that determine how much money they can give to the child at any given time. The child cannot force the trustee to release any additional assets, nor can the trustee decide to violate the terms of the trust by giving the child more than the allotted amount.
Because a Special Needs Trust limits the child’s access to the inheritance you leave behind, the child can qualify for Medicaid and other forms of assistance much more easily. In addition, this type of trust also ensures that a trustee of your choosing will properly manage your child’s money. Since many disabled children are not able to manage money on their own, this can be very beneficial.
Special Needs Trust Options
Not every Special Needs Trust is the same. When creating this type of trust, you will have several decisions to make. For example, you will need to decide whether to make the trust revocable or irrevocable. While you can easily change the terms of a revocable trust, making changes to an irrevocable trust is much harder and often impossible. However, an irrevocable trust offers other benefits, such as tax avoidance. An experienced attorney can help you decide whether a revocable or an irrevocable trust is most appropriate for you.
You must also decide whether you will create your Special Needs Trust as a living trust that exists while you are still alive. The alternative is to incorporate the trust into your Last Will and Testament, which means the trust will form upon your death. Creating the trust while you are still alive allows you to avoid probate, make sure you have chosen the right trustee, and enjoy other benefits. However, waiting to create the trust upon your death can also offer advantages in some cases. Your attorney can help you decide which option is best.
Regardless of when you create your trust or whether it is revocable, every Special Needs Trust will also need a trustee. Selecting the trustee responsible for managing the trust is one of the most important decisions you will make in this process. Common trustee choices include siblings or other relatives of your disabled child, non-profit organizations, a financial institution, or a trust company. Some parents also choose to name more than one person or organization to act as co-trustees. Talking to your attorney is the best way to explore these options and select the best manager for your Special Needs Trust.
Why You Need an Attorney
Thanks to the internet, it is now possible to find forms, templates, and other resources online that claim to solve estate planning problems. However, when it comes to providing for a disabled child, you don’t want to take any chances. The best way to make sure you have developed a will and/or trust covering all the bases is to work with an experienced estate planning attorney.
The process of creating a Special Needs Trust or another type of estate plan designed to provide for your child with disabilities is complicated. Making mistakes may leave your child without the resources they need and/or negatively impact your child’s ability to qualify for public assistance. Likewise, dealing with this complex situation is stressful and overwhelming, especially when the stakes are so high. A qualified attorney can guide you through each step of the process, helping you explore all of your options and make the choices that are most appropriate in your unique situation. If you have questions or concerns about your estate plan, your attorney will also be able to provide the information you need. Furthermore, if you need to make changes to your plan in the future, your attorney will assist you in modifying the plan as needed.
The Bottom Line
It is possible to use a will and/or trust to provide for a child with disabilities. However, many different options are available, and each approach comes with advantages and disadvantages. Working with an attorney is the best way to ensure that you make the right choices.