If you have a son or daughter with any type of disability, then you are probably vitally aware of the fact that you must plan your estate carefully to benefit that child in the most sincere manner possible. The manner in which you direct the ultimate distribution of your estate following the event of your death may greatly affect the quality of life of your child who lives with special needs. This article is intended to present basic information to help you begin considering the important issues involved in developing an estate plan when the future of a child with a disability must be taken into account.

At the outset and even before visiting with your estate planning attorney, consider carefully and talk openly with your spouse (if any) about your ideas regarding how to best provide for your child with a disability. Then meet with your attorney, who (if chosen carefully) will be able to provide you with a range of planning opportunities and also provide you with additional questions which you have not previously considered. Then, conduct more discussion within your family, including other children, relatives, and family friends and professionals (such as the child’s physician), where appropriate. Continue working with your attorney and financial planner to create and implement a plan which feels appropriate under your special circumstances. Following is a list of issues properly addressed as you face the task of preparing your estate plan when you have a child with a disability:

  • ➣ Realistically evaluate your child’s disability and the prognosis for his or her future development. If necessary, obtain a professional evaluation of your child’s prospects and capability to earn a living and to manage financial assets. However, keep in mind that you may change your estate plan as your child develops and more information about your child becomes available.

  • ➣ Carefully inventory your financial assets, including their current values.

  • ➣ Consider the living arrangements of your child after your death. Such living arrangements will have an important impact on how your assets should be distributed to or for the child. If you determine that a guardian or conservator may become necessary, you need to select who that person should be (and select an alternative appointee).

  • ➣ Analyze the earning potential of your child, how much she or he can be expected to contribute financially, as a result of employment.

  • ➣ Consider what government benefits your child needs and is eligible to receive. Such benefits may include social security or supplemental security income, or they might be in-kind support programs, such as subsidized housing or sheltered workshop employment.

[Government benefits can be divided into three basic categories: (i) those which are unaffected by the financial resources of the beneficiary (e.g., social security disability insurance (SSDI)); (ii) those which are by the financial resources of the beneficiary (e.g., supplemental security income (SSI) and Medicaid, both of which have financial eligibility requirements); and (iii) those where payment for services is determined according to the person’s ability to pay (e.g., the services provided will remain unchanged, but the individual will be required to pay or not, based on his or her then current financial situation).]

Some families appear to believe that they have so few available assets that an estate plan is not necessary. However, we frequently have more assets available to us than we realize. In addition, it is possible to generate at a relatively low cost assets which can be made available to a disabled child once you are gone and no longer able to provide a more direct level of care for your child. The most notable asset of this type is life insurance. Whether you consider that you have substantial means or with strictly limited resources, estate planning has considerable, long-term value.

Disabilities, of course, can take many forms and have varying degrees of severity. The nature and severity of your child’s disability will affect the nature of the estate plan that you, as parents, develop. Many individuals have physical disabilities or health impairments which do not affect their ability to manage their personal financial and other affairs. If your child has such a condition, the primary factor in determining in what manner to leave an inheritance to the child should be whether or not the child receives (or may one day receive) government benefits such as Supplemental Security Insurance (SSI), subsidized housing, personal attendant care, or Medicaid. If this is the case, then it is most important to create an estate plan which does not negate your child’s eligibility to receive public benefits.

[It is important to note that negating your child’s eligibility to receive public benefits at the time of your death may have impacts which extend well beyond limiting cash resources available to your child. Many individuals receiving public benefits come to rely on the counsel and relationships formed with care providers and case workers, among others. If your child loses his or her public benefits, he or she is also losing all of the personal contacts and services which are coupled with the financial benefits. Such a loss in many cases cannot be replaced, even with inheritance dollars.]

If your child has a physical disability or health impairment and she or he is not eligible for public benefits, you may be able to dispense with elaborate planning devices and direct the child’s inheritance directly to the child. However, if you believe that your child’s disability may reduce her or his financial earning capability, you may want to take special care to leave a greater portion of your estate to this child than to your non-disabled child(ren). If you are concerned with your disabled child’s financial acumen, then you can utilize a trust for the benefit of the child, in which a trusted family member, professional, or friend is charged with making distributions to or for the benefit of the child which will serve to promote his or her overall well being and quality in life. If your child’s disability involves the future possibility of deteriorating health and more involved health care needs, preserving the anticipated inheritance assets for the long term becomes of primary importance. If your child’s deteriorating health make it difficult for him or her to maintain employment or to pay for health care costs and insurance, government benefits may become critical to your child’s security later in life and your estate plan should not get in the way of access to such benefits.

It is important to consider your own child’s specific situation in the context of commencing your estate planning and also to remember that preserving your child’s access to public benefits will include much more than money. Your child may become eligible for valuable services such as health care, vocational rehabilitation, supported employment, subsidized housing, and personal attendant care. If your child acquires too many assets through directly inheriting all or part of your estate, he or she may not be eligible to receive public benefits until he or she has completed a “spend-down” of all of the inheritance money, meaning that by the time your child becomes eligible to receive public services, the child will be destined to live well below the poverty line for the balance of his or her life.

If your child’s disability affects his or her mental capability, the need to create a special estate plan is more obvious. Mental illness and cognitive disabilities frequently impair a person’s ability to manage his or her own financial affairs, while simultaneously increasing financial need. As a result, you must take care to ensure that there are assets available after your death to help your child maneuver through life, while also providing that the assets are protected from his or her inability to manage them.

All parents, but particularly parents of children with disabilities, should have a will or a revocable living trust in place. The object of the will is to ensure that all of the assets of the deceased parent are distributed in accordance with the deceased parent’s wishes. Once you and your estate planning attorney have completed your will, it is important to ensure that your assets are held in a manner which will give full effect to your will. Toward that end, it is important to note that jointly owned property with rights of survivorship passes independently of a will and also that assets such as life insurance proceeds, annuities, and retirement plan assets pass by way of contract, through “beneficiary designations.” It is important to seek the advice of counsel and to adjust your asset ownership and beneficiary designations to ensure that your will acts as a conduit for assets intended for your disabled child.

The primary government benefit programs appear to recognize that family contributions to a disabled person’s well-being serve considerably to improve his or her overall quality of life. Provided that the form of your testamentary contribution to your child is supplementary in nature (as opposed to duplicating services provided by public programs), it will be permitted.

The primary, reliable method of making sure that your child’s inheritance is available when she or he needs is the creation of a Special Needs Trust (“SNT”). The SNT is created to provide for the management of the child’s inheritance, while at the same time maintaining the child’s eligibility for public assistance benefits. How is this done? Simply put, the family leaves whatever resources it deems appropriate in the care of the trustee of the SNT. The trust is managed by a trustee on behalf of the person with the disability.

Government agencies recognize special needs trusts as a fund created by another which benefits a disabled individual (and therefor, the fund is not included as a part of the disabled child’s estate for evaluating public benefit entitlement). Notwithstanding, the governmental regulations related to SNTs provide strict guidelines which must be observed. This is a primary reason why it is vital that if you are contemplating the creation of a SNT, you will need to take advantage of the advice and counsel of an estate planning attorney who is knowledgeable about SNTs and current government benefit programs. Generally speaking, a special needs trust must:

  • ➣ Be established by the parent or other family member other than the beneficiary;

  • ➣ Be managed by a trustee (and successor trustees) other than the beneficiary;

  • ➣ Give the trustee the absolute discretion to provide whatever assistance is required (with the beneficiary holding no “demand rights,” with respect to trust assets);

  • ➣ Prohibit the trustee from distributing more income or resources than permitted by the government directly to the beneficiary;

  • ➣ Provide asset distribution for supplementary purposes only; distributions should be made for purposes in addition to those services provided by the government benefit program, not replace them;

  • ➣ Define what constitutes “supplemental” and “special needs” in general terms, as well as in specific terms related to the unique needs of the beneficiary;

  • ➣ Provide instructions for the ultimate distribution of the assets remaining in trust, following the event of the death of the beneficiary (and repayment of funds over which the government may assert a claim);

  • ➣ Provide choices for successor trustees (from among people who and organizations which would be well suited to take a personal interest in the welfare of the beneficiary); and

  • ➣ Because the special needs trust is a legal document which is regulated by state laws, the document will require provisions which cause that document to remain in compliance with such state laws.

We will be pleased to sit with you an answer questions about your specific situation in detail. Feel free to contact us directly to schedule a time to meet.