Parents of a child with special needs encounter many challenges. From ensuring their child is adequately cared for, to maintaining adequate financial support – parental duties are never-ending. In the event of a parent’s untimely death, it becomes crucial that a special needs trust be properly put in place so as to not affect the financial needs of the child.
Estate planning is a critical step for every family to enable the future of their children. For parents of children with special needs, however, this process can be a daunting task. Not only does it ensure that their children will continue to receive public benefits, it also helps avoid future hardships their children might face.
If you are a parent of a child with special needs, it’s essential to start planning for your future and the future of your child. Contact Masson & Fatini today to discuss your special needs estate planning. Our team of Orange County estate planning lawyers are dedicated to assisting our clients in all of their estate planning needs.
What is a Special Needs Trust?
A special needs trust ensures the preservation of public benefits for your child with special needs while also improving their quality of life. This type of trust also assists the child in lifetime money management, protecting their eligibility for public benefits, and practically ensures that funds are readily available to them should their benefits run out or become restricted. Special needs trusts also allow children to receive inheritances, gifts, lawsuit settlements, or other funds while not compromising their eligibility for government programs.
The Three Main Types of Special Needs Trusts
A first-party trust is created to protect the assets in the trust – ensuring that they are used for their benefit – and that any remaining assets are used to reimburse the cost of medical care provided for by the government. First-party trusts are useful in the event that the child receives Medicaid, SSI, or other needs-based benefits and comes into a large inheritance of money. Because this type of trust allows the child to retain their benefits, it also ensures that they are still able to use their own funds when necessary.
A third-party special needs trust is often used by parents or other family members to assist in asset management, including housing, stocks, and other investments. Much like a first-party trust, a third-party trust also ensures that any assets held in the trust do not affect a child’s ability to receive benefits and makes sure that the funds can be used for any supplemental needs beyond what is covered by benefits provided by the government. In the event that the child with special needs dies, remaining funds can be passed to other members of the family without being required to reimburse the government.
A pooled trust allows a child with special needs to pool their resources with those of other trust beneficiaries for investment. A pooled trust also ensures that separate accounts are maintained for the needs of each and every recipient. In the event of the death of the beneficiary, remaining funds are paid back to the government for care, with a portion of the funds going towards a nonprofit organization that is responsible for managing the trust.
An Achieving a Better Life Experience (ABLE) account acts as a savings account that can pay for various living expenses of a child with a disability. Much like a Special Needs Trust, ABLE accounts protects a child’s eligibility for public assistance and disability benefits. However, ABLE accounts include Medicaid payback provisions dependent on state laws.
ABLE accounts allow for a child with special needs to remain eligible to receive benefits from public programs, with eligibility restrictions based on income and assets owned. ABLE accounts can help pay for many of the corresponding costs of raising a child with special needs. However, individuals must meet particular requirements to be eligible for an ABLE account, including:
- The diagnosis of the disability or impairment must occur before the individual reaches the age of 26 years.
- The individual is receiving disability benefits under SSI or SSDI.
An ABLE account may be a better option for some families compared to a Special Needs Trust. ABLE accounts are easier to set up and maintain compared to Special Needs Trusts and provide other advantages for children with special needs, as well as their parents. Due to state regulations, parents of a child with special needs should verify with their state government to determine if there are any special rules or regulations regarding ABLE accounts in their home state.
Long-Term Care Insurance for Parents
As parents age, healthcare costs and assisted living services can diminish retirement accounts and other assets that the child with special needs would otherwise inherit after the parent’s death. Long-term care insurance policies do not put a child’s benefits at risk and ensure that the child’s inheritance remains untouched. Using a long-term care insurance policy can also guarantee future trust funding while also maintaining the estate of the parents.
Survivorship Life Insurance Policies
Also known as a Second-to-Die policy – survivorship life insurance policies provide parents with an additional way to provide for their child with special needs. After the death of the parents, a survivorship life insurance policy is only paid out after the death of both insured parties, and proceeds can then be paid directly to the child’s Special Needs Trust. Premiums for a survivorship life insurance policy are often less expensive than single policies and can also be easier to qualify for.
Get Help With Your Plan for The Future of Your Child
Planning for the future is an extensive process and can be confusing for many people. By working closely with an Orange County estate planning attorney, you can develop an estate plan for your child with special needs. Once your estate plan has been established, and your wishes have been recorded, you can ensure that your child will have the quality of life you intended for them when you are no longer able to provide that for them yourself.
Consult with an Orange County trust attorney at Masson & Fatini today to determine the best estate plan for your family and ensure that you have done everything you can to provide for them in the future.