Helping Families with Special Needs

  • What is the best way to provide for a loved one with special needs after you are gone?  How do you plan for the long term care of a disabled child or elder adult?

    When considering your estate plan, it is important to avoid some of the costliest mistakes that many people make when drafting their estate plan.

    An estate plan that is properly drafted can ensure that your Special Needs Beneficiary (SNB) has sufficient assets to improve his or her quality of life.   Unlike most other beneficiaries, SNB may never have the ability to recover from a planning mistake or a failure to plan.

    Traditional estate planning techniques do not work very well when it comes to the SNB who receives needs-based governmental benefits.

    For example, if a SNB received an outright distribution of your assets after your death by a will or in a trust, and he or she was a recipient of SSI/Medicaid/Medi-Cal (public benefits), your child’s public benefits might be terminated.

    Two Common Costly Mistakes When Planning for Special Needs

    Mistake #1   Relying on Siblings to Provide Special Needs Care

    If you leave assets to your healthy child hoping that the healthy child will take care of his or her disabled sibling, be aware that the assets could be lost due to:

    • The healthy sibling having his or her own financial priorities which could cloud the decision making ability.
    • The pressure from the sibling’s spouse, who may have differing views of how the money should be spent, causing discord in the marriage.
    • A legal judgment of the sibling or the sibling’s spouse from a creditor, back taxes, or lawsuit.
    • Being counted as an asset in the property settlement in the sibling’s divorce.
    • A personal injury lawsuit (most likely a car accident) or sibling or sibling’s spouse or children.
    • The sibling’s bankruptcy trustee to be distributed to his or her creditors.

    Mistake #2   Disinheriting Your Special Needs Loved One

    Some estate planning professionals advise disinheriting your special needs loved one, in order to protect the public benefits he or she receives for food, shelter and/or medical care.

    This is a real miscarriage of justice.  Your SNB is most likely the one who needs financial help the most, especially considering that public benefits rarely provide more than the very basic needs.  It is also uncertain whether you will be able to rely on government benefits to continue in the future.

    There are better ways to provide for your SNB after your death, while still protecting his or her much needed public benefits.  One solution may be to create a special needs trust to hold the inheritance of a SNB.

    A special needs trust should be drafted by an attorney familiar with this area of law, and customized to meet the unique circumstances of the SNB, while complying with the very complicated public benefit rules.

    A Special Needs Trust (SNT) can allow your SNB to continue to receive government benefits and still have a source of funds to pay for his or her extra needs that the government does not provide for, thereby enhancing the quality of life for the SNB.

    A properly drafted SNT does not provide any direct distribution of income, nor grant any ownership rights to the assets for the SNB, therefore it does not disqualify government benefits, and the assets are protected from creditors.

    Examples of eligible special needs expenses can include medical and dental expenses, necessary or desirable equipment (such as, a specially equipped van), training, education, insurance, transportation and essential dietary needs, electronics, appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses: the sorts of things families now provide to their child or other SNB.

    A SNT can also allow family and friends to make gifts to the trust, or to name the trust as a beneficiary of life insurance or retirement funds, or as beneficiary or their own estates.

    Use great caution in choosing a trustee. The trustee of a SNT should understand the trust maker’s objectives and be qualified to invest the assets in a manner most likely to meet those objectives.

    The trustee chosen should be ethical, financially savvy and well-organized.  The trustee can be a family member, loved one or a professional trustee.


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