Planning for disabled children

Families with a disabled child face unique challenges when preparing an estate plan.

A common challenge parents face when designing a plan is how to best provide for their child upon their death without jeopardizing the child’s current or future eligibility for government benefits. Proper planning can coordinate family desires and government programs.

SSI, Medicaid, Section 8 Housing and some veterans’ benefits are essential to people with disabilities, and loss of those benefits can have a dramatic impact on quality of life and available health care. Receiving an inheritance can jeopardize government benefits. In an effort to avoid this, parents often plan to leave money to a third party with an understanding that he or she will take care of the disabled person; however, this is rarely the best option. There is no guarantee that the third party will follow your wishes. Additionally, the money becomes subject to that person’s creditors.

A special needs trust maximizes protection for the disabled child without putting benefits at risk. If properly written and managed, the trust assets are considered exempt for purposes of qualifying for asset based government benefits. Distributions are meant to supplement what the government otherwise provides.

Special needs trusts must be properly managed. Special consideration should be given as to who to name trustee. A perfectly written special needs trust can still jeopardize government benefits it is incorrectly managed. A professional trustee can provide professional expertise in the area and is often a good choice.

Special needs trust are legal exceptions to the limited asset requirements for government benefit programs. They protect eligibility for benefits, provide for a higher quality of life, provide instructions for management of assets, extend the life of assets and provide creditor protection.