Estate planning is an essential responsibility for all parents, but it takes on even greater importance if you have a child with special needs. Planning for a child who may rely on you in some capacity for their entire life requires addressing unique considerations to ensure their well-being. It’s vital to understand what steps are necessary to safeguard your child’s emotional, physical, and financial needs, especially in the event of your death or incapacitation.
When developing your estate plan, two primary concerns should take center stage: 1) determining who will care for your child if and when you are no longer able to (commonly referred to as guardianship), and 2) establishing how your child’s financial needs will be met in your absence.
NAMING LEGAL GUARDIANS FOR A LIFETIME OF CARE
The first and most vital step in securing your child’s future well-being is to designate both short-term and long-term legal guardians. These individuals will take custody of and care for your child should you pass away or become incapacitated. For a child with special needs who may never be fully able to live independently, your parenting responsibilities extend far beyond childhood and continue well into their adulthood, making this step even more crucial.
While the lifelong responsibility of caring for a child with special needs may feel overwhelming, many of our clients share that naming legal guardians provides immense peace of mind. Knowing that their child will be cared for by trusted individuals, in the way they wish, brings a profound sense of relief. Additionally, we often incorporate customized plans to ensure that the chosen guardians are not only clearly instructed but also encouraged to provide the same level of care and attention you offer your child.
For instance, we’ve designed plans where the named guardian is compensated for taking your child to activities they enjoy, such as weekly dinners or trips to the movies. These thoughtful touches help ensure your child continues to experience the same joy and connection they share with you. Without clear written instructions—and in some cases, financial incentives—built into your estate plan, meaningful activities like these are often overlooked once you are no longer there to facilitate them.
For guidance on selecting the individual(s) best suited to serve as legal guardians and creating the proper instructions for them to provide your special needs child with the same level of care as you, consult with us as your Personal Family Lawyer®.
PROVIDING FOR YOUR CHILD’S FINANCIAL FUTURE: SPECIAL NEEDS TRUSTS
In addition to naming legal guardians for your child with special needs, it’s essential to ensure there are adequate financial resources in place to support the life you envision for them. This aspect of planning can be particularly complex when it comes to children with special needs, as their financial requirements often involve unique considerations.
In fact, it may seem like a “Catch-22” situation—you want to leave your child enough money to afford the care and support needed to live a comfortable life, yet if you leave money directly to a person with special needs, you risk disqualifying that individual for much-needed government benefits like Medicaid and Supplemental Social Security Income (SSI).
Fortunately, the government allows assets to be held in what’s known as a “special needs trust” to provide supplemental financial resources for a physically, mentally, or developmentally disabled child, without affecting his or her eligibility for public healthcare and income assistance benefits. However, the rules for such trusts are complicated and can vary greatly between states, so you should always work with your Personal Family Lawyer® to create a comprehensive special needs trust that’s properly structured and appropriate for your child’s specific situation.
SETTING UP THE TRUST
Funds from a special needs trust cannot be given directly to your child. Instead, they must be distributed through a third party who manages the trust. When establishing the trust, you will typically serve as both the Grantor (the person who creates the trust) and the initial Trustee (the individual responsible for managing it). Your child with special needs will be named as the Beneficiary, ensuring the trust is specifically designed to meet their unique needs.
You’ll then name the person you want responsible for administering the trust’s funds upon your death or incapacity as the Successor Trustee. To avoid conflicts of interest, overburdening the legal guardian with too much responsibility, and providing a system of checks and balances, it may be a wise decision to name someone other than your child’s legal guardian as a Trustee.
As the parent, you serve as the Trustee until you die or become incapacitated, at which time the Successor Trustee takes over. Each person who serves as Trustee is legally required to follow the trust’s terms and use its funds and property for the benefit of your child with special needs.
Additionally, you should name multiple Successor Trustees—which can even be a trust company, bank, or another professional fiduciary—as backups in case something happens to prevent the individual you’ve named as primary Trustee from serving.
There are two ways to set up a special needs trust. In the first option, we build it into your revocable living trust, and it will arise, or spring up, upon your death. From there, assets that are held in your living trust will be used to fund your child’s special needs trust.
In the other option, we can set up a special needs trust that acts as a vehicle for receiving and holding assets for your child right now. This option makes sense if you have grandparents or other relatives who want to give your child gifts sooner rather than later.
Finally, it is important to ensure that the trust will have sufficient funds to last throughout the life of your child. One common method to provide funding is for you (or another loved one) to name the special needs trust as the beneficiary of your life insurance policy. Another way is for family members and friends to make donations or gifts to the trust and/or include it as a beneficiary in their will.
Meet with us, as your Personal Family Lawyer®, to discuss all of your available options for ensuring your child’s special needs trust has sufficient funds to last for his or her lifetime and for guidance on the estate planning vehicles best suited for passing money to the trust.
THE TRUSTEE’S ROLE
Once the trust is funded, it’s the Trustee’s job to use the trust funds to support your child without jeopardizing eligibility for government benefits. To ensure this is handled properly, the Trustee must have a thorough understanding of how eligibility for such benefits works and stay current with the ever-changing laws. The Trustee is also required to pay the beneficiary’s taxes, keep detailed records, invest trust property, and stay current with the beneficiary’s needs.
Given this immense responsibility, it’s often best that you name a legal or financial professional who’s familiar with the complexities of the law as Trustee or Co-Trustee, so they can properly handle the duties and not jeopardize your child’s eligibility for government benefits. Alternatively, we can advise your named personal Trustee on how to manage the Trust.
YOUR TRUSTED SOURCE FOR SPECIAL NEED PLANNING
If you have a child with special needs, meet with us, as your Personal Family Lawyer®, for trusted guidance and support in creating a special needs trust and other estate planning vehicles for your child. We offer an array of estate planning strategies that are designed to accommodate the unique needs presented by a child with special needs and their families.
We will assist you in passing on the financial assets needed for your child to have a rich quality of life, without jeopardizing his or her eligibility for government benefits. We’ll also support you in finding and appointing a legal guardian and/or Trustee to ensure your child is protected and provided for in the exact manner you wish when you die or if you become incapacitated.
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This article is a service of SG Law PLC, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life & Legacy Planning Session™.