Special Needs Planning, What Should I be Thinking About?

For families with a special needs dependent child or adult, few things in life are “normal” or “routine.” And when it comes to estate planning for these families, the rule stays the same.

For many people with special needs dependents, especially children, the question of “how will I take care of my child tomorrow?” often times falls by the wayside as they struggle to answer the question of “what do I do for my child today?” While most of these families recognize the need to prepare a well-thought out, comprehensive estate plan, the plans that they often come up with represent little more than a “let’s-get-something-down-on-paper” approach.  Although unfortunate, this approach is completely understandable, families of special needs children are many if not most times focused on the here and now, on those things that will help their child today.

The unique circumstances of special needs families often times require an estate plan that is as equally unique. But according to a 2008 study conducted by The Hartford, 84% of the parents who have a plan for their special needs child(ren) unfortunately DID NOT seek the advice of a certified financial planner or attorney when they prepared that plan.  While some estate planning is better than no estate planning for certain, the reality of having a special needs child demands that your estate plan address very specifically all of that child’s special needs.

If you are the parents of a special needs child, you should review your estate plan often as your child gets older and as both yours and his/hers circumstances and conditions change. As you review your existing estate plan, or contemplate having one prepared for the first time, you should be mindful of the following potential pitfalls as they relate specifically to special needs planning:

1. Be very careful about leaving money to someone in the hopes that they will use it for the care, maintenance and support of your child.

If you want your special needs child to be the beneficiary of any part your estate, be sure to leave that part of your estate to the beneficiary and not someone you hope will use your resources for your child’s benefit. While waste, neglect and even fraud often times contribute to the siphoning off of estate assets that were ear marked for a special needs beneficiary, the situation is usually not that dilatory or even nefarious. Often times the “legal” beneficiary of of your resources has every good intention of using the inheritance for your child’s benefit. But often times their good intentions are insufficient to maximize and protect those assets for the benefit of your child.  When you give your assets to an individual with the hopes that he or she will take care of your child, you run the risk of exposing those funds to the individuals creditors, claims and liabilities  That certainly would not be what you had intended, but it very well may turn out to be a very unintended and unfortunate result.

2. Not any old trust will do.

So if leaving your assets to someone else in the hopes that person will use those assets to take care of your special needs child with the funds is not the answer, then putting your assets into a trust must be, right? The answer is yes and no. While transferring your assets into a trust for your special needs child’s benefit is a very appropriate option, it is more complicated than that. A trust created for the benefit of a special needs child, whether that trust is to be effective while you’re alive or after you are gone, must contain very specific language before it will be able to provide your child the benefit it was created to provide.

3. Watch out for inadvertent estate planning.

One thing many of our clients learn for the first time when we sit down with them is that certain assets may not be set up to pass as part of the estate documents.  Assets like life insurance policies, retirement accounts, certain bank accounts and certain pensions pass to the surviving beneficiary named in the particular asset account. For instance, you might have a $2,000,000 life insurance policy that is slated to go to your child when you pass away.  But that might not be the right thing to do when your child has special needs. You could designate your estate as the beneficiary, but that probably won’t be any better.  Another option would be to name a trust you have established for your child as the policy’s surviving beneficiary. That would be a pretty good option, but what if the value of your insurance policy is such that, upon your death, Uncle Sam decided that he was going to deprive your child of a 1/3 or more of those policy benefits as estate tax? Wouldn’t you want to preserve as much of that life insurance benefit for your child’s support and maintenance as you could?  Of course you would!  And with the help of a licensed estate planning attorney, there is a way to do it.

The above three issues are three major issues to consider as you, the parent of a special needs child, review or begin the process of preparing your estate.  Knowing about these issues as you sit down and discuss your estate planning needs with a professional estate planner will go a long way towards helping you prepare an estate plan that is just as unique and special as your unique and special child.


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