Special Needs Planning

Setting up a special needs trust is a critical step in securing the financial future of a loved one with disabilities. Avoiding these common mistakes ensures that a special needs trust provides long-term support without jeopardizing government benefits. Careful planning and professional guidance help families secure their loved one’s financial future. 1. Failing to choose the right type of trust Many people make the mistake of choosing the wrong type of trust. Special needs trusts come in two main types: first-party and third-party trusts. The beneficiary’s assets fund a first-party trust, while parents or relatives fund a third-party trust. Selecting the wrong type directly impacts eligibility for government benefits. 2. Naming an unsuitable trustee Selecting the wrong trustee can lead to mismanagement of trust assets. The trustee should have financial knowledge, understand government benefit rules, and act in the best interests of the beneficiary. Many families benefit from using a professional trustee or co-trustees to ensure proper administration. 3. Failing to fund the trust properly Setting up a trust but not funding it is a costly mistake. Ensure that assets intended for the beneficiary, such as life insurance or inheritance, are directed to the trust. Avoid giving assets directly to the beneficiary, as this could disqualify them from receiving government benefits. 4. Ignoring the impact of government benefits A special needs trust must be structured to maintain the beneficiary’s eligibility for programs like Supplemental Security Income (SSI) and Medicaid. Mismanaging the trust or failing to follow the rules can result in a loss of these critical benefits. Working with a knowledgeable attorney can help avoid these issues. 5. Neglecting regular updates Family and financial situations and the law change over time. Failing to update the trust to reflect these changes can create problems for the beneficiary. Regularly review the trust to ensure it meets current needs and complies with evolving laws.

Choosing the right trustee for a special needs trust is crucial for ensuring a loved one receives the care and financial support they need. The trustee’s role involves managing the funds and making decisions in the beneficiary’s best interest. To ensure success, it’s essential to understand the qualities and considerations involved in selecting a good trustee. Look for experience and understanding A trustee should have experience with managing finances, investments, and record-keeping. Knowledge of the specific needs of individuals with disabilities is also important. An ideal trustee understands government benefit programs, like Supplemental Security Income (SSI) and Medicaid, and how to manage the trust so that eligibility remains intact. If family members lack these skills, consider professional trustees, such as small trust companies or banks. Consider reliability and trustworthiness Reliability and trustworthiness are essential traits for a trustee. The trustee must act in the beneficiary’s best interest and make ethical choices regarding the trust’s funds. Choosing a responsible individual or company who can be depended upon to follow through on duties is critical. This person will handle sensitive decisions that impact the quality of life for the beneficiary. Balance family ties with objectivity Family members are often selected as trustees because of their close relationship with the beneficiary. This personal connection can help the trustee make informed decisions about care. However, it is also important that the trustee remains objective and makes decisions without emotional bias. Sometimes appointing a family member in a more limited role than trustee helps achieve the right balance between familiarity and expertise. Understand the benefits of a professional trustee Professional trustees, such as trust companies or banks, offer expertise and reliability. They understand regulations and manage trust assets according to legal requirements. While professional trustees charge fees, they provide consistency and avoid the emotional challenges that family members might face. Families should weigh these benefits against the costs when considering a professional trustee. Choosing the right trustee can feel overwhelming, but focusing on the needs of the beneficiary and seeking the right balance of expertise and empathy will help ensure the right outcome.

For families with a loved one who has a disability, understanding how a special needs trust affects Supplemental Security Income (SSI) is necessary. SSI provides essential financial support, and ensuring that other assets do not interfere with it is a top priority. Understanding special needs trusts A s pecial needs trust is a legal arrangement that holds assets for a person with a disability without jeopardizing their eligibility for public benefits like SSI. The trust can pay for a variety of expenses that enhance the individual’s quality of life, such as: Medical care Education Personal items Travel and entertainment Properly setting up a special needs trust ensures that it does not affect the beneficiary’s SSI benefits. Choosing the right type of special needs trust, whether a first-party or third-party trust, is important, as each has different rules and implications for SSI. Protecting SSI benefits SSI is a means-tested program, meaning eligibility depends on the individual’s income and resources. By placing assets in a special needs trust, you can protect these resources from getting counted toward the SSI resource limit. This protection ensures that your loved one can maintain their SSI disability-related benefits while still enjoying a higher quality of life. It is important to ensure that you set up an irrevocable trust, as revocable trusts may still count as resources, potentially affecting SSI eligibility. Ensuring long-term security Establishing a special needs trust is a crucial step in securing your loved one’s financial future. By thoughtfully managing assets, families can prevent complications that might otherwise lead to financial hardship, ensuring that their loved one has support and care in the years ahead.

As a parent or legal guardian of a child with special needs, you are likely no stranger to the Individualized Education Program (IEP) process. While the IEP is a vital tool in ensuring your child receives a tailored education, it is not the only path to accessing support. There is a whole world of related services that can further support your child’s learning and development. What are related services? Related services are developmental, corrective and other supportive services that can help a child with a disability to benefit from special education. These services can include: Therapy services: Such as speech-language therapy, occupational therapy, physical therapy and counseling services Transportation: Specialized transportation or accommodations to access transportation Assistive technology: Provision of devices or equipment that help a student participate in school These services often go b eyond traditional academic support . Related services can also be provided in alternative settings, such as at home or in the community. How are related services determined? Related services are determined by the IEP team, which includes parents, teachers and other education professionals. During the IEP meeting, the team will discuss your child’s strengths, needs and goals, and determine which related services are necessary to support their education. As a parent, you play a critical role in this process and should advocate for the services you believe your child needs. Why are related services important? Related services can have profound impact on your child’s ability to access and participate in their education. For instance, a student with a physical disability may require physical therapy to develop the necessary strength and mobility to participate in classroom activities. Similarly, a student with a speech-language impairment may need speech therapy to effectively communicate with their peers. Facing roadblocks? While schools are responsible for providing related services, you can still encounter obstacles when requesting access to these services. If your child is facing barriers to accessing necessary related services, know that you are not alone. You can consult with an experienced special education lawyer who can provide guidance and support in advocating for your child’s needs. Remember, you are your child’s strongest ally, and accessing the right support can make all the difference in their educational journey.

Parents usually want to provide for their children, including those with special needs. However, leaving a large inheritance directly to an adult child with special needs can cause major problems. This approach might seem like the best way to ensure financial security. However, it can lead to unintended consequences. These outcomes can undermine the child’s long-term well-being and financial stability. Impact on government benefits Many individuals with special needs use government programs such as Supplemental Security Income and Medicaid. These programs have strict income and asset limits. If an adult child receives a large inheritance directly, they might become ineligible for these benefits. Losing access can be a major blow. These programs often provide medical care, housing assistance and other vital services. Regaining eligibility can be a complex and lengthy process, leaving the individual without necessary support in the interim. Financial management challenges Managing a large sum of money can be overwhelming for anyone, but it poses unique challenges for individuals with special needs. Some may lack the financial literacy or the capacity to handle substantial funds responsibly. This can lead to mismanagement or exploitation by others, resulting in the rapid depletion of the inheritance. Emotional and social consequences A large inheritance might create an imbalance in relationships, both within the family and with others. Siblings or other relatives might feel resentment or jealousy. Additionally, having a significant amount of money without the skills to manage it can cause stress and anxiety for the individual with special needs, potentially exacerbating their condition. Long-term concerns and solutions Long-term financial security for an adult child with special needs requires careful planning. Parents should consider financial strategies that provide consistent support throughout the child’s life. Estate planning approaches such as special needs trusts, guardianships or conservatorships, A BLE (Achieving a Better Life Expe rience) accounts , structured financial gifts and life insurance policies are some possibilities. Parents can explore these alternative methods to the various challenges of providing support. Proactive planning goes a long way.

You know at some point you will not be around to provide care for your special needs child, which has probably already led you to consider taking out a life insurance policy that will pay out benefits to cover the care of your child. A first step is to determine how much money your child’s care will require. Forecasting the ongoing and lifetime costs associated with caring for someone with special needs is going to vary depending on the family involved. Still, there are some general guidelines any parent can benefit from. Assess current ongoing needs  When evaluating the continual needs of your child, you should consider the regular expenditures you currently make on your son or daughter. Your child may require medic al care , therapy sessions, specialized equipment and caregiver support, all of which should go into a cost forecast. Also consider transportation costs for medical appointments and other essential activities. Forecast lifetime costs In addition to immediate needs, project the lifetime costs of caring for your child. Medical treatments, therapies and any other foreseeable expenses are bound to add up through the lifetime of your child. Also consider the living arrangements of your offspring and how much it will take to sustain them for the life of your loved one. Deduct government assistance When calculating life insurance coverage, deduct any support your child receives from government assistance programs, such as Medicaid and CHIP. These programs reduce your financial burden and allow for a more accurate assessment of the coverage needed to bridge the gap between your available resources and the needs of your child. At the same time, you should build protection into your estate plans so your child does not lose out on government benefits. You could structure your life insurance policy to pay out to a special needs trust. This trust will manage the funds on behalf of your child without jeopardizing access to government assistance. With your care calculations in mind, you may also directly place money in the trust in addition to planning for a future life insurance payout. Thanks to the flexible nature of estate planning, you have a variety of options to work with.

Special needs planning is essential for securing your loved one’s future, but it is never too early to start the process. It is often in your best interest to consider special needs planning as early as possible. The sooner you begin planning, the more options will be available to you. You have greater flexibility The sooner you start special needs planning, the more tools and strategies you can put in place. Beginning the financial and legal preparations while your child is young gives you more flexibility. For example, you may be able to fund a special needs trust or ABLE account that can grow over time. Starting early also allows you to research and understand the options completely. You can develop financial strategies Special needs financial planning tools, such as ABLE accounts and special needs trusts, have greater benefits when established early. ABLE accounts, for instance, allow individuals to save up to $100,000 without impacting needs-based government benefits. You can plan for future changes The earlier you start saving, the more funds will be available for your child’s future. With a special needs trust, you can place more assets into the trust if you create it early in the individual’s life. Special needs planning is complex, but it can give you peace of mind for your loved ones. As of the third quarter of 2020 , there were approximately 75,000 ABLE account holders and each account held an average of $6,000 in savings. The sooner you start planning, the more you can save for future needs.

For aging parents with adult children who have special needs, the need for long-term care planning is undeniable. Taking the initiative to plan ahead is a proactive approach that can benefit your family in numerous ways. 1. Financial stability Financial stability is a cornerstone of any successful long-term care plan. By initiating the planning process now, you can establish a solid financial foundation to support your loved ones. Without careful planning, the costs associated with special needs care can be overwhelming. Early planning allows you to identify available resources, make informed decisions and explore various financial options, such as insurance, savings, and government assistance programs. 2. Tailored care solutions Each family is unique, and the needs of your loved ones are equally distinct. Commencing long-term care planning early affords you the opportunity to create tailored care solutions. Whether it is finding the right care facilities, in-home care providers, or special education programs, early planning ensures that you have the time and resources to identify and implement the best options for your family’s specific circumstances. 3. Emotional and mental preparedness Caring for a family member with special needs can be emotionally and mentally challenging. Initiating long-term care planning early can give you and your family the necessary time to adjust to these challenges. It also allows you to establish a support system, seek counseling or therapy, and access community resources that can offer emotional and mental support for the journey.  Along with planning for your child’s future, it is also important to consider your potential long-term care needs. A person turning 65 has a 70% likelihood of needing some form of support and care during the remainder of their life.

A loved one with special needs may require the help of government benefits such as Supplemental Security Income and Medicaid. However, your relative could lose out on these benefits without a special needs trust. When someone with special needs receives an inheritance or a monetary gift, it can cause the individual to become ineligible to receive further benefits. Placing inheritances and gifts into a special needs trust may avoid this. A special needs trust has special language that makes it an effective and useful tool. Giving trust control to another person A special needs trust is one that the beneficiary does not control. Your special needs relative cannot be the trustee of the trust or exercise any direction over the trust, such as altering the terms of the trust or abolishing it altogether. The idea of a special needs trust is that the beneficiary does not own the assets in the trust. This helps ensure that the government does not count it in a means test which could disqualify your loved one from benefits. Limitations on trust payments It also matters how your special needs relative spends the trust money. If government benefits pay for shelter, food and medical benefits, the trust should not go toward those expenses. When you establish a trust, you can use the trust documents to direct your trustee to make payments for specific expenses. These can include dental costs, rehabilitation services or any medical treatment not covered by existing benefits. Crafting the trust with the right language helps ensure your disabled loved one can utilize all sources of financial help to their fullest and avoid a possibly disastrous loss of benefits in the future.