When you have a child with physical, emotional, or mental challenges, careful estate planning is crucial. In many cases it is important to preserve the child’s eligibility for government benefits and other programs. Wise planning can do that while still allowing the child to be benefit from his or her share of inheritance.
Let me share an example:
The Smiths had four children and left a simple will that left all assets to the living spouse when one died. After the second spouse died, the remaining assets were divided equally among the four children. Sounds fair? It did not turn out so.
The oldest sibling died within weeks of the last parent’s death. The youngest sibling had both physical and mental challenges and required considerable assistance with daily living. Fortunately, one sister lived nearby and was able to give some support. The brother lived many miles away and though he cared, he was not able to be involved on a daily basis.
As soon as the estate was settled, each heir received a modest amount of money. The sibling who needed the most help was immediately disqualified for the help she had been receiving. She had to move in with the nearby sister. Only after all of her funds from the estate were exhausted were they able to apply for and prove eligibility for benefits again.
Wise and knowledgeable planning could have avoided all of this. The best way to handle the situation is to create a Special Needs Trust, and place or leave the assets intended for that child in the Trust. Such a trust is designed to supplement benefits received from government programs. Instead of paying for medical care, for example the trustee can use the trust funds for other needs that Medicare and Medicaid do not cover. The Trust can pay for clothing, entertainment, discretionary spending and even vacations.
It is also important to fund the Special Needs Trust sufficiently, so that assets are available to meet his or her needs throughout a lifetime. Sometimes life insurance payable to the Trust can be used for this.
Sometimes parents are so busy tending to the many demands of caring for their child with special needs, that it is hard to deal with the future. It is so important, however. This child may need care throughout a lifetime. And though the planning requires careful (as in full of care) decision making, we can help make it less overwhelming.
Contact our office for help in designing a Special Needs Trust. We can create the Trust to receive retirement funds or other assets without creating negative repercussions. Your goal is to help your child with special needs without preventing them from receiving benefits. Let’s make sure your best intentions are truly realized!