Parents do their best to let their offspring know they are loved, each in their own unique way. When the family includes a special needs child, their needs are different. Regardless of any difference in needs, they are not loved any less than their siblings; the same holds true for estate planning for a special needs family. According to Tickertape, “Estate Planning for Special Needs Children: Trying to Be Even-Steven?”, estate distributions with a special needs child typically need to be different than distributions to their siblings. It’s not about fairness, it’s about good planning.
Children with special needs are typically eligible for state and federal benefits that provide them with assistance for their long-term support. Among the most common are Supplemental Security Income (SSI) and Medicaid. In many states, SSI may qualify children for Medicaid, or Medicaid comes automatically with SSI. These are need-based benefits that are means-tested. SSI recipients have a strict assets threshold of $2,000 for an individual. If a special needs child is individually named as a beneficiary, it might push him or her above that ceiling. This could result in ineligibility for the program benefits that might be used to cover medical, therapeutic, or housing needs.
When money is paid directly to the child as beneficiary, it can cut SSI benefits. The same is true if the special-needs heir disclaims the inheritance. Government benefits may be retained if an inheritance is set up in a Special Needs Trust (SNT), designed to help a beneficiary with special needs preserve government aid while protecting assets. The trust ensures the child with special needs has access to his or her inheritance assets, but in a way that won’t jeopardize SSI or other benefits.
However, there might be tax implications. The income generated in a special trust could be taxable at trust tax levels. Creating an SNT can be complicated, and the rules often vary from state to state. Speak to a qualified estate planning attorney familiar with planning for special needs beneficiaries to be sure that all income is reported properly and there are no deductions left on the table.
Be certain to consider the tax implications, but more importantly the eligibility requirements of any government programs when you create an estate plan. Talk with your children about your plan and the decisions you are making with regard to the future care for your special needs child. This will help everyone in the family be better prepared and ready to work together to maintain the integrity of the family, which is part of your legacy.
In fact, at Family Estate Planning Law Group, we strongly encourage our clients to hold a Family Care Meeting to outline the roles and responsibilities you ask of those who will be implementing your plan, such as trustees or health care agents. There is no need to disclose assets to potential heirs, as their type and value will likely change over time. However, discussing the plan now—before a crisis occurs—can be the key step in ensuring your estate plan will work.
Planning for special needs beneficiaries is an important part of estate planning, but you’ll want to work with an attorney experienced in this type of planning. For more information on this and other estate planning topics, explore our website and contact us to schedule your consultation today!
Reference: Tickertape (June 14, 2017) “Estate Planning for Special Needs Children: Trying to Be Even-Steven?”