Estate Planning For Special Needs Children

For a family with a special needs child estate planning is fundamentally different than that of an average family. While the latter expect the children to assume productive lives upon the age of ascension, the former may expect their caregiving roles to continue far beyond adolescence. Because the special needs child is typically incapable of self-sufficency, it's absolutely vital that proper planning be accomplished to ensure continuity of safety and care. There are three sources of assistance for the special needs child: the caregivers, state and federal governments, charitable organizations. The objective of estate planning is the successful integration of activity and programs for the maximum benefit of the special needs child.

Planning should begin immediately to avoid important decisions being made by the court or government. Thereafter updates should be performed as changes in life warrant. The document at the foundation of planning is the Will. This document sets forth the final instructions of the caregiver. An attorney well versed in the practices of estate planning for special needs children should be consulted. Coordination of efforts with professionals from insurance, investment and accounting fields will help ensure a fully viable plan is placed. A document without the legal authority of a Will, but still of great value, is a Letter Of Intent. The purpose is to reasonably detail a special needs child's life skills. Both difficulty and success should be included. A supplemental video is recommended as a visual aid to the Letter Of Intent. Activities of daily living can be clearly demonstrated, allowing the new caregivers an opportunity to see the special needs child's routine interactions. This tool can be of great assistance during the time of transition following the passing of the primary caregiver.

Selecting a successor caregiver may be one of the most difficult tasks in the estate planning process. A natural tendency is to consider immediate family members for the role. Caution is advised: personal dynamics must be thoroughly taken into account, with particular sensitivity to the position of siblings. No matter how benevolent and loving, placing a sibling in the role of guardian removes the level of peer-to-peer relationship and replaces it with a parental role. Therefor great care must be taken to ensure that any sibling(s) assuming such a role do so completely voluntarily, and have the objective emotional command to retain some degree of sibling equality. To attempt to foster responsibilities on a reluctant sibling will only have a negative long term impact, potentially causing severe damage to the relationship, if not finally destroying it.
Two dynamics are present, that of the guardian and that of the special needs child. Neither is subservient to the other. Even though the child may not be the emotional, mental or physical equivalent of the guardian, respect for the child's dignity, and understanding of dignity must be maintained. Otherwise, the successor caregiver will find relations strained at the outset, a very difficult proposition to overcome during the time of upheaval following the passing of the primary caregiver.

Guardianship may be formal or informal. In the case of the former, after the age of ascension it must be obtained through petition of the State. In assuming the role of guardian a person assumes responsibility for the personal welfare of the special needs child. The primary caregiver may also elect to give the guardian financial stewardship as conservator of the estate. Sensitivity in this decision is as important as in choosing who will serve as successor caregiver. Many families have had relations strained or destroyed over the issue of finances. Again, if a sibling is being considered for the role, thought should be given to the impact on long term relations.

There are four common options for families with a special needs child ...

The special needs child is disinherited
The special needs child is named a beneficiary
Assets are left to the guardian / conservator
A special needs trust is established

The special needs child is disinherited.

• Benefits: By disinheritance, the child may meet asset test qualifications for government assistance, effectively shifting the primary portion of the cost of support from the caregiver to the government. This is especially important in consideration of the high cost of health care. The child may also meet asset test qualifications for charitable assistance. Then, within the monetary parameters set forth by the government and charitable organizations, the successor caregiver and family may supplement the child's financial needs. Caution is advised to the successors: be clearly aware of what the parameters are so as to not violate financial limitations imposed.

• Disadvantages: The child is dependent on assistance from the government, a level which many citizens consider to be minimal. Assistance from the successor caregiver and family may be limited by the parameters of means tests, or support may become inconsistent during times of divorce, unexpected expenses, job loss, or death. Further, whether or not the child is cognizant of the fact, s/he has been disenfranchised. Depending on the emotional and mental stamina of the child, this could have a detrimental effect. An offsetting factor may be to consider a small inheritance well within the parameters of means testing. This will allow the child to have an emotional measure of equality.

The special needs child is named a beneficiary.

• Benefits: The child is accorded the same rights and privileges as all society, (though, on balance, may not actually be fully capable of the responsibility this entails). And, if the inheritance is large enough, the child may enjoy a standard of living higher than may be provided through government and charitable assistance.

• Disadvantages: A special needs child who has not yet attained the age of ascension, or who has been placed under the guardianship of another, may not be able to take legal title of the inheritance. Direct ownership may cause the child to lose governement and charitable assistance if the size of the inheritance exceeds asset tests. Further, the government may seek to recover the cost of benefits already paid. And finally, like all of us, the special needs child may be at risk for loss from unscrupulous people.

Assets are left to the guardian / conservator.

• Benefits: It's likely that no one will have greater care for your child than the person you name as the guardian / conservator.

• Disadvantages: Unless you establish a trust, the assets may become the legal property of the guardian / conservator. And as such the assets may be subject to unforseen risk over which the guardian / conservator has no control: divorce, unexpected financial upheaval, job loss, or death. The last item adds at least two serious questions: if the guardian / conservator acts for the benefit of your child, who will succeed this role? And will the guardian / conservator's estate beneficiaries lay claim to assets designated for your child? Finally, the assets are exposed to the risk of creditor claims and lawsuits made against the guardian / conservator.

A special needs trust is established.

A special needs trust is a legal document wherein a trustee is designated and instruction given for the provision of the special needs child. The trust is typically put into effect upon the passing of the primary caregiver. The assets within the trust are held by the trust for the benefit of the child. The child owns none of the assets, thereby remaining eligible to meet government and charitable organization asset tests. The trustee has the discretion to use the assets as supplement to the assistance provided by the government and charitable organizations. Ideally, the trustee will spend the maximum amount permissible without exceeding the parameters set forth by the asset tests.

• Benefits: Like the positions of guardian and conservator, you select who will serve as trustee. If you choose, one person may serve in all roles or you may apportion as you see fit. The child remains eligible to meet asset tests for government assistance, effectively shifting the primary portion of the cost of support from the caregiver to the government, especially important in consideration of the high cost of health care. The child may also meet asset test qualifications for charitable assistance. Assets in the trust are designated only for the use of your child.

• Disadvantages: The cost of establishing the trust. Supplemental assistance from the trust must not exceed the parameters set forth by the asset tests. The child is dependent on assistance from the government, a level which many citizens consider to be minimal. Upon the death of the special needs child, state government may seek to recover the cost of benefits paid form any remaining trust assets.

Almost universally professionals recommend the use of a special needs trust. The benefits are far greater than the disadvantages. Funding may be accomplished in the same manner as you would fund any other vehicle, but most often life insurance is used. This is because life insurance can provide for the funds to be available at the very time required, the passing of the caregiver. There are other alternatives, and though traditional investment vehicles such as stocks, bonds, mutual funds and so forth may possibly yield a greater return, no other product provides a guarantee to pay a specific amount at a specific time. With a piece of paper, a drop of ink and pennies on the dollar, insurance creates cash where none existed before, usually far more than people can accumulate in their lifetime. A life insurance broker should be consulted as to the type and amount needed to fund the trust. Options include term and permanent, group and individual. The choice as to which is best is dependent on circumstances unique to the family. Generally though, if you're considering group insurance, find out how much is available and what the parameters are if you leave the firm's employment. Many people are unaware of the high cost of conversion.

The use of life insurance as a funding mechanism for the special needs trust may encounter a problem if insurance for the primary caregiver is unaffordable or unattainable. One alternative is to insure someone else's life. If mom can't be insured maybe dad can. If dad can't maybe mom can. And if mom and dad can't maybe an aunt or uncle or someone else can. An instant estate is still created, but the timing of funding is an unknown variable. Using a life other than the primary caregiver to fund a special needs trust should be considered as supplemental.

A special needs child who is capable of working may be able to contribute to his or her own financial security. The following is an idea that this author conceived while working on a case in which the primary caregiver was uninsurable. There were two sons: one was healthy but the other had down syndrome. The latter child was capable of lite work and held a part-time job bagging groceries at a supermarket. The idea called for permanent insurance to be placed on the healthy sibling. The premium would be paid by the child with down syndrome. The owner and beneficiary of the policy would be the primary caregiver with a Will in place to fund the special needs trust. If the healthy child predeceased the down syndrome child the insurance would provide funding for the trust. If the child with down syndrome predeceased the healthy child policy ownership would transfer to the healthy child who would have full access to the living benefits of the policy: cash accumulation for loan and surrender values, plus the death benefit for his heirs. It was a win-win for all people involved.

However you structure your estate plan it's important to begin immediately. Remember, people never plan to fail, they fail because they didn't plan.

    Your Name

    Address

    City

State     Zip

    Telephone

    Best Time To Call (weekdays please)

    Email

    Interest
    Comments