Part of providing comprehensive estate planning for families includes addressing the needs of family members with special needs. According to the article “How to Help Clients With Special Needs Children” from Accounting Web, some of the tools used are trusts, guardianship, and tax planning. Your estate planning attorney will create a plan for the future that addresses both legal and financial protections.
A survey from the U.S. Department of Health and Human Services revealed that 12.8 percent of children in our country have special health care needs, while 20 percent of all American households include a child with special needs. The CDC (Center for Disease Control) estimates that 26% of adults in America have some disability. In other words, some 61 million Americans have some disability.
Providing for a child with special needs can be expensive, depending upon the severity of the disability. The first step for families is to have a special needs trust created through an estate planning attorney with experience in this area. The goal is to have money for the support and care of the child available, but for it not to be in the child’s name. While there are benefits available to the child through the federal government, almost all programs are means-tested; that is, the child or adult with special needs may not have their own assets.
For many parents, a good option is a substantial life insurance policy, with the beneficiary of the policy being the special needs trust. Depending on the family’s situation, a “second to die” policy may make sense. Both parents are listed as the insured, but the policy does not pay until both parents have passed. Premiums may be lower because of this option.
Parents of a child with special needs must have their will created to direct their assets to go to the special needs trust and not to the child directly. Diversion to the special needs trust is done to protect the child’s eligibility to receive government benefits.
Parents of a child with special needs also need to consider who will care for their child after they have died. A guardian needs to be named as early as possible in the child’s life if something should occur to the parents. The guardianship may end at age 18 for most children, but extended protection is necessary for special needs individuals. The guardian and their role need to be spelled out in documents. It is a grave mistake for parents to assume a family member or sibling will care for their child with special needs. The need to prepare for guardianship cannot be overstated.
The special needs trust will also require a trustee and a secondary trustee if, at some point, the primary trustee cannot or does not want to serve.
It may seem more straightforward to name the same person as the trustee and the guardian, but this could lead to difficult situations. A better way is to have one person paying the bills and keeping an eye on costs and a second person taking care of the individual.
Planning for the child’s long-term care needs to be done as soon as possible. A special needs trust should be established and funded early on, wills need to be created and updated, and qualified professionals become part of the family’s care for their loved one.
Having a child with special needs is a different kind of parenting. A commonly used analogy is for a person who is expected to be taking a trip to Paris but finds themselves in Holland. The journey is not what they expected, but still a wonderful and rewarding experience.
Reference: Accounting Web (Sep. 13, 2021) “How to Help Clients With Special Needs Children”
