Children and adults with disabilities face plenty of tough challenges in life. As the parent of an adult child with disabilities, I know! Failure to plan will lead to even greater problems and financial hardship for the child with special needs in the future, but proper planning now will create greater resources and opportunities in the years to come. Here, we offer some “Do’s and Don’ts” for planning for a child with special needs.
Plan for Future Care. Children with special needs may require assistance throughout their lives. Parents must consider and plan for where the child will live, who will care for the child and what that care will include. Parents should execute a will or trust naming a future guardian for the child, and they should provide clear information and instructions to such guardian about all the major areas of daily life for the disabled child. A “letter of intent” will explain the child’s medical, educational, family, social, religious and recreational history, likes and dislikes. The letter of intent will assure a smoother transition from parental care to non-parental care for the child.
Plan for Financial Support. It is also crucial to access all financial resources available to provide for a child with a disability. The child’s needs may be expensive, and they will generally be met from family resources (such as gifts or inheritance from parents, grandparents, etc.) and/or government entitlement programs (such as Medicaid and SSI). Medicaid assistance pays for medical services and SSI provides monthly payments for food and shelter expenses to disabled persons who meet certain financial criteria. These programs are generally not available to individuals who own more than $2,000 in money and other assets. Therefore, a gift or inheritance from a family member to a disabled child or his/her guardian will disqualify the child for these program benefits. BUT – a parent or other family member may establish a properly-drafted “special needs trust” for the child’s benefit. Once the special needs trust is established, any family gifts and inheritances through wills or life insurance policies can be designated to go to the trust rather than the child, and the trustee (parent or grandparent) can hold, manage and spend such assets for the child’s benefit while the child remains eligible to receive governmental assistance. Also, an ABLE Act account can be established for a person whose disability existed prior to age 26, and anyone can contribute to that account (up to an annual maximum amount) which will not disqualify the individual for SSI or Medicaid.
When planning for your special needs child or grandchild:
1. Plan now for your child’s (and family’s) future security. (We’re not promised tomorrow!)
2. Select a guardian and trustee for your special needs child.
3. Prepare a “letter of intent” describing your child’s medical, social, recreational, educational, religious and family history and future needs. (Contact us for forms and help with this.)
4. Learn the requirements for eligibility of your child for Medicaid (medical assistance) and SSI (monthly support assistance). (Ask us for educational information about this.)
5. Consult with legal and financial professionals with expertise in special needs planning. (As the parent of an adult child with a disability, I have special emphasis in this type planning.)
6. As part of your estate plan, establish a special needs trust to receive and hold assets for your special needs family member without causing loss of Medicaid and SSl benefits.
7. Make provisions to fund the trust through your will, living trust, with financial assets or life insurance.
8. Open an ABLE account through the Mississippi Department of Rehabilitation Services for the special needs individual and fund it (with up to $15,000 per year). If able, the person with a disability can manage the account themselves. (Call us for more information.)
9. Communicate your plan to other family members so that gifts can be made to the Special Needs Trust or ABLE account instead of directly to your child.
10. Maximize the resources available to your special needs child through these positive actions.
1. Leave money or property to your special needs child directly in your will. Such assets will disqualify the child for government benefits.
2. Leave money or property to a Custodian for your child in a Uniform Transfers to Minors Act (UTMA) account. (Such funds automatically belong to the beneficiary at age 21.)
3. Leave the special needs child’s share of property to another family member to “hold” for the child. (The property may be lost to creditors or through poor financial handling.)
4. Hold property or accounts in joint ownership with your special needs child. It will be considered the child’s property or money for SSI and Medicaid.
5. Name your special needs child as an outright beneficiary of any life insurance policy or retirement account.
6. Leave property or money to a trust unless it is a Special Needs Trust drafted by an expert in special needs planning and public benefits.
For help with this important planning, contact us today.