Families with special needs have to plan their estate in order for them to secure the future of their special needs child by making sure that their assets will be available for use by their special needs child. In planning for their special needs child, they have to put into consideration the fact that the child has to be eligible for external benefit programs like Medicaid. If they do not properly plan their estate then their assets will be available to their special needs child and this might prevent the child from partaking in these special programs.
Need for a special plan
This ensures that the child’s future is catered for by securing public benefits for the child, other needs include
- Lifetime money management for the benefit of the disabled child;
- Protecting the child’s eligibility for public benefits; and
- A special plan ensures that even though public funds are restricted or not available for the child, there will still be enough cash for the child.
Available planning options
Various planning options are available for estate planning for a child that is disabled. These planning options aim at making the child eligible for public programs like Medicaid. In a situation whereby cash is made available for the disabled child, he might no longer be eligible for public programs assisted housing, supported employment, vocational rehabilitation, group housing, job coaching, etc.
Giving all inheritance to the sibling of the disabled child
This Planning option provides that the child does not get an inheritance instead the estate of the parents goes to the siblings of the disabled child. They plan this with the mind that the siblings will take responsibility of their disabled brother or sister. There is a downside to this option, there could be chances that the siblings will forfeit the estate to creditors and this will leave them broke.
Designating a part of your estate to the disabled child
This will ensure That the child get enough available cash that will cater for him or her but at the same time, it will also make the child ineligible for public assistance like Medicaid. Even if the child is not exempted from these public services, what the child will benefit will be reduced.
Disinheriting the child
This is a very simple option which leaves the child with no inheritance but it makes the child eligible for public programs.
Leave any inheritance in a Special Needs Trust.
A trust is a fiduciary relationship in which a person legally gives the ownership of an asset to a second person for the benefit of a third party. The assets are not made available to the third party immediately depending on the terms of the trust.
This might just be the best possible option for the disabled child. A trust that is set up for the child will ensure that at a stipulated time, cash will be made available for the child. For the main time, no cash is available to the child and this will make the child eligible for public assistance programs. This option as I said earlier might just be the best as it makes cash available to the child when the time comes and also does not make the child ineligible for public assistance.
You can decide to either make this trust available to the child at your death or while you are still alive. Making it available at your death means it has to be embedded in your last will and testament. You can prefer to make it available to the child while you are still alive, this is known as a living trust.
Necessary considerations for setting up a special need trust.
Generally, there are different types of trust available and these trusts have different features. You will have to put into consideration some things before setting up a trust. If you are concerned about avoiding tax and the amount you want to put into the trust is very high then you might want to use an irrevocable trust. If you are only concerned with having control over the trust then a revocable trust is just okay for you.
Families looking to set up the best estate plan which will cater for their child with need should ensure to consult an attorney who will properly guard you through the process. Our attorneys are always available for consult and hire.