Special Needs Trust | Estate & Financial Planning for Family

When our child was diagnosed with a developmental disability, the last thing on our minds was estate planning.  We were immersed in the world of Early Steps, doctors, therapy, and Individualized Education Plans.  Then, using the McKay Scholarship - a scholarship specifically for Special Needs schooling - we placed her in a school that we felt could best cater to her needs.  Once she settled into the school and we developed some stability and routine, we took the opportunity to sit back and think about planning for her future. 

It has become apparent that she may not be able to live fully independently in adulthood.  We are confronted now with a new question: what can we do to help provide for her future needs - in particular, as it applies to special needs?  I am fortunate in that I work in the field of personal financial planning; I have training, tools and resources at my disposal to help our clients answer these questions every day.  Now it’s time to put these tools and resources to use for my own family, and I would like to share some thoughts with you too.

There are a number of questions that will probably come to mind when you think about a special needs child’s future, especially a future without you:

·         How independent might she be? 

·         What sort of living situation will she have?  

·         Will she work? Drive? Shop on her own?

All sorts of questions come up. You won’t know the answers for some time if she is still young, but you realize that you need to do what you can now to help her be as independent and successful as she can, even when you’re gone.

You may have discovered along the way that others want to help.  Family and friends have asked what they can do. 

In the future, your child may be eligible for certain public benefits like Medicaid and Supplemental Security Income (SSI).  They may be vital to helping your child maintain a healthy and financially stable lifestyle.  In order to qualify for these programs though, they cannot have more than a certain amount of assets and income.  Here is where estate planning - and in particular - special needs financial planning - becomes VERY important.  What would happen if in your attempt, or perhaps a grandparent’s attempt, to assist your child financially, the child inherits a sum of money?  This simple and common attempt to help - without proper special needs planning - could inadvertently blow your child’s eligibility for those public benefits! 

Special Needs Trust Information

There is an estate planning tool called a Special Needs Trust (SNT) that can be very powerful in assisting families to avoid this financial misstep.  If this trust is created by you, a family-member, or anyone other than the individual with a disability, (the beneficiary), then the Special Needs Trust is considered a "third-party" SNT.   Here’s the value of the SNT:   Assets placed in an SNT for a special needs beneficiary's benefit do not count against him/her when applying for and/or receiving public benefits.  The SNT cannot be used to pay for basic necessities such as food and rent.  It should only be used to pay for things that are NOT covered by these programs,  such as college costs, a disability-modified vehicle, a private duty nurse or aide, durable medical equipment, etc. 

When setting up the Special Needs Trust, there are a few things to consider carefully.  First, which attorney should you use?  Find one who practices in the area of estate planning and/or elder law.   He or she should be intimately familiar with Special Needs Trusts, and ideally, open to working closely with a Special Needs Financial Planner who holds the Chartered Special Needs Consultant (ChSNC) designation.  Next, who will be responsible for administering the trust?  This is the trustee.  Is there a family-member or friend whom you feel could handle this job and do it well?  Or would you feel more comfortable naming a professional to do it?  Some attorneys and CPAs will agree to serve.  There are also a variety of corporate trustees to choose from.  Whoever it is, they need to know and understand the rules of how the trust must function in order to protect the beneficiary’s benefits.  And remember, the Special Needs Trust and the beneficiary will probably be here long after you are gone, so look out 40, 50, maybe even 80 years from now.

Once the Special Needs Trust is established, anyone can contribute to it.  Let your family and friends know.  You may want to consider making an announcement of the trust’s creation, like you would for a gift registry.  Grandparents especially should be alerted, if it is their intent to leave an inheritance for your child, so they can incorporate the Special Needs Trust into their estate planning.  It’s important to remember that special needs individuals who inherit money personally are in jeopardy of losing their benefits.  The whole family should be made aware of this risk, and Special Needs Financial Planning should be an important part of determining the amounts and timing of any gifts.

The Special Needs Trust, partnered with effective Special Needs Financial Planning,  is a wonderful and powerful way for families to come together and support their loved one’s future.   It’s never too soon, or too late, to get started!  If you need help, give us a call.

KRISTINE D’ESTERHAZY, CFP®, ChSNC(TM), is a Client Service Advisor for Paragon Wealth Strategies, LLC.  Please see her bio here.

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific planning strategy, investment, or investment strategy (including those undertaken or recommended by PARAGON Wealth Strategies, LLC), will be profitable or equal any historical performance level(s).  PARAGON and its advisors are neither attorneys nor accountants.  Please consult a financial advisor or your CPA for information specific to your personal situation.  For additional disclosures please click here: Disclosures

Paragon Wealth Strategies
10245 Centurion Pkwy N. Ste. 106 Jacksonville, Florida 32256
Phone: (904) 861-0093