How do I take care of my special needs child after I am gone

Having children with disabilities comes hand-in-hand with not just taking care of them, but making sure they are cared for in the situation that you are not there to provide the care yourself. Though we tend to avoid thinking that tomorrow will be our last day, the reality is that tragedies are rarely expected and should always planned for. If you have children with special needs, it is crucial that you set up an estate plan that is tailored to the needs of your children in the event that you are not there to take care of them.

special needs child trust

The first thing to consider when crafting an estate plan for children with special needs is how to ensure they don’t become ineligible for any needs-based public benefits like Social Security Income (SSI) or Medicaid as a result of any assets you may leave them. With a conventional estate plan, leaving a disabled child with an inheritance of at least $2000 will almost certainly terminate any government assistance they may be receiving. Instead, you should seek the help of an estate planning attorney who can properly draft a special needs trust that will leave your child in good hands in the case of your passing. A special needs trust is a legal arrangement designed to allow special needs individuals to receive supplemental income without risking their eligibility for government assistance programs. By leaving your assets in a trust, the inheritance is made unavailable to your child unless it is distributed to them by a designated trustee upon need.

What kind of trust should I leave for my child?

While several different types of Special Needs Trusts exist to provide financial support to special needs individuals, including First Party Trusts, which only store assets owned by the beneficiary, and Pooled Income Trusts, which invest those assets, if you are looking to leave money to a disabled child in a way that doesn’t interfere with them receiving necessary government benefits, you should highly consider setting up a Third Party Special Needs Trust. A Third Party Special Needs Trust (SNT) is typically established by parents or legal guardians for the benefit of a child with a disability. With this particular trust, as mentioned, beneficiaries are not permitted access to the funds in the trust, and third parties are required for any of the funds to be spent on goods and services for the beneficiaries. An additional perk of this type of trust is that upon the death of the beneficiary, any leftover funds are not required to be reimbursed to Medicaid, and instead can be distributed to existing heirs.

Be Aware of the Tax Situation

While slightly less important than the actual establishment of a trust, tax considerations do come into play when you are leaving money for your child. Generally speaking, families will usually consider a revocable trust, or a trust that can be changed with a trust amendment, when they wish to retain maximum control over the assets in the trust as well as have the final say over who the beneficiary is. On the other hand, an irrevocable trust is more common among families seeking to lower their income tax and escape the burden of the estate tax in the case that the value of their assets exceeds the exemption threshold.

How do I appoint the right trustee?

One of the most important decisions that parents can make when creating a Special Needs Trust for their child is appointing the right trustee. Though the selection process varies among families, parents should ensure that the chosen trustee understands and can perform the following duties: Financial Duty, and Personal Needs and Advocacy.

Financial Duty

The first responsibility that the trustee must be capable of fulfilling is the financial duty, or making sure the assets in the trust do not significantly drop in value. Consistent with the law in most states, the trustee has no legal obligation to dole out, or make any distributions from the trust. Additionally, while the trustee has free reign over any investments he may wish to make with the trust funds, or how existing ones are managed, they are legally obligated to make sure the investments are properly diversified, and are not too conservative or aggressive. For example, if a trustee decides to pursue a safe investment in a Certificate of Deposit (CD) with a one percent return, while a properly managed portfolio can easily rake in seven percent, the trustee can be liable for the difference since he did not make the most fiscally responsible decision possible. The trustee is also liable for losses in funds in the case that they make too aggressive of an investment and lose money.

Personal Needs and Advocacy

Arguably the most important responsibility that a trustee must be able to carry out is keeping track of the beneficiary’s personal needs which include being wary of how distribution will affect eligibility for government benefits, acting consistently with the intent of the Special Needs Trust, and assuring the care and safety of the beneficiary. When opening a Special Needs Trust, it is important that parents consider matters beyond their child receiving public benefits, but also whether the beneficiary will need assistance in caring for themselves, in which case an ideal trustee must be there to provide it.

When selecting a trustee, the family should also keep in mind other factors such as the lifespan of the child in question. If the child is relatively young and could very well live for another 75 years, parents should take into account the possibility of electing a successor-trustee to perform the duties of the trustee in the event that the original trustee passes. Parents should also understand that as soon as 25 or 30 years from the establishment of the trust, governmental policy may be entirely different, especially as it pertains to receiving public benefits. In this case, parents should appoint an independent party to review the conditions and performance of the trust, and make sure that it conforms to changes in law.

Conservatorship- Who will take care of my child?

Aside from creating a trust to ensure the financial stability of a disabled child, parents should also seek a conservatorship to guarantee that a child who is not capable of caring for himself receives the necessary care that he needs. A conservatorship is a court-granted document that allows a responsible adult (a conservator) to care for another adult (a conservatee). Though appointing a conservator entails a lengthy process involving court-ordered paperwork, local center intervention as well as a court-ordered investigator, and finally, a court hearing, it is an essential process for a special needs child in the event of his parents’ passing.

It is no secret that taking care of a child with special needs can oftentimes be costly and very challenging. Regardless, it is the responsibility of parents of disabled children, with the help of a professional estate planning attorney, to craft an estate plan with the appropriate provisions that will leave the child in good hands, as well as financial stability.