Proper estate planning is important for everyone, regardless or age or wealth, but for parents of a special needs child, smart planning is essential. Improper planning (or worse, no planning at all) could leave your child without the resources he or she so desperately needs, or even disqualify him/her from vital government benefits. This article addresses 8 common, and costly, planning mistakes that such parents must avoid if they want to protect their special needs child.
COSTLY MISTAKE #1: Disinheriting the child. Many disabled people rely on SSI, Medicaid or other government benefits to provide food and shelter. You may have been advised to disinherit your disabled child (the child who needs your help most!) to protect that child's public benefits. But these benefits rarely provide more than subsistence, and this "solution" does not allow you to help your child after you are incapacitated or gone. When your child requires -- or is likely to require -- governmental assistance to meet their basic needs, you should consider establishing a Special Needs Trust.
COSTLY MISTAKE #2: Ignoring the special needs when creating a trust for the child. A Trust that is not designed with your child's special needs in mind will probably render your child ineligible for essential benefits. The Special Needs Trust is designed to promote the disabled person's comfort and happiness without sacrificing eligibility. Special needs can include medical and dental expenses not covered by Medicaid, cutting edge or non-traditional treatments or therapies, necessary or desirable equipment (such as specially equipped vans), training and education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive computers, books, games, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses -- the sorts of things you now provide.
COSTLY MISTAKE #3: Creating a "generic" Special Needs Trust that doesn't fit. Even some Special Needs Trusts are unnecessarily inflexible and generic. In most cases, an attorney with some knowledge of the area can prevent a trust from invalidating the child's public benefits; however, many trusts are not customized to the child's specific needs. As a result, the child fails to receive the benefits that the parent provided when they were alive. Another mistake is when lawyers put a "pay-back" provision into the trust rather than allowing the remainder of the trust to go to others upon the death of the special needs child. These pay-back provisions are necessary in certain types of Special Needs Trusts -- and not necessary in others. An attorney who knows when they should be used can save your family hundreds of thousand of dollars, or more.
COSTLY MISTAKE #4: Procrastinating. Because none of us knows when we may die or become incapacitated, it is important to plan for your special needs child early, just as you would for other dependents, such as minor children. Unlike other beneficiaries, your special needs child may never be able to compensate for your failure to plan. A child without special needs can obtain more resources as he or she reaches adulthood and can work to meet essential needs. Your special needs child may not have that opportunity.
COSTLY MISTAKE #5: Failing to invite other people to contribute to the trust. A key benefit of creating the trust now is that your extended family and friends can make gifts to the trust or remember the trust as they plan their own estates. In addition to the gifts and inheritances from other people who love your child, you can leave your own assets to the trust in your will. You can also name the trust as a beneficiary of life insurance and retirement benefits.
COSTLY MISTAKE #6: Choosing the wrong trustee. During your life, you and your spouse can manage the trust. When you and your spouse are no longer able to serve as trustee, the person or persons you specify in the trust instructions will become the new trustee, such as a professional trustee or a team of advisors. Make sure that whomever you choose is financially savvy, well-organized, and ethical.
COSTLY MISTAKE #7: Relying on your other children to use their money for the benefit of your special needs child. This can be a temporary solution, such as during a brief incapacity, if your other children are financially secure and have money to spare. However, because of the potential problems, this solution will not protect your child after you and your spouse have died or when siblings have their own expenses and financial priorities. For example...
What if your child with the money divorces? His or her spouse may be entitled to half of the funds and will not likely care for your special needs child.What if your child with the money dies or becomes incapacitated while your special needs child is still living? Will his or her heirs care for your special needs child as thoughtfully and completely as your child with the money did?
What if your child with the money loses a lawsuit and has to pay a large judgment or has other creditor problems? The court will certainly require your child to turn that money over to his or her creditors.
When you create a Special Needs Trust, you protect all of your children. The trust facilitates easier record-keeping and allows your other children to rely on the assistance of a professional trustee, if needed. Siblings of a special needs child often feel a great responsibility for that child, as they have all of their lives. When you provide clear instructions and a helpful framework, you lessen the burden on all of your children and build a loving, involved relationship that benefits your child with special needs.
COSTLY MISTAKE #8: Failing to protect the special needs child from predators. Thieves, con men and other criminals look to take advantage of those who are most vulnerable, like your special needs child. A child trapped in the system with precious little resources and without anyone to look after their affairs can easily fall prey to these predators. When you establish a Special Needs Trust and properly structure your estate plan to protect your special needs child, you ensure that your child will never be left alone, will always be provided for, and will always have a trustworthy person -- either a guardian or trustee, or both -- watching over them.
Questions or Comments? Please don't hesitate to call or email me. Visit our website for contact info.
Joseph P. Donlon, Esq., CFP is thefounder of Donlon & Associates, PC, a boutique law firm dedicated to providing high quality, focused legal counsel to clients of all ages and wealth levels in the following areas:
Wills & Trusts
Asset Protection Planning
Estate Tax Planning
Elder Law
Special Needs Trusts
Probate & Estate Administration
Donlon & Associates, PC serves clients throughout New York City, Long Island, Westchester, and Northern New Jersey. These areas include Nassau County, Suffolk County, Westchester County, Queens, Brooklyn, Manhattan, Staten Island, Hoboken, Jersey City, Hudson County, and Bergen County.
Please visit us at http://www.donlonlaw.com/
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