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Estate Planning, Trusts, and Accounts
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Parents and guardians that have children with special needs must plan with
care so that income and assets can be used in the best interest of their child. With
careful legal and financial planning, parents can make sure that their children have
a good quality of life as time goes on. Proper planning will allow your child to
have the services he needs, such as Social Security (SSI) and Medicaid, without
being penalized for having assets from sources such as a gift from family or income
from a lawsuit. We hope this page will help you start to build familiarity with all
that goes into planning for your child’s long-term future.
What is involved in Estate Planning?
Estate planning looks different for each family. Getting started can be
the hardest part. We suggest that you start by talking to a professional financial
planner and/or a lawyer who has experience working with parents of children with
special needs. An expert will know the challenges, rules, and details of Medicare,
SSI, guardianship, and other issues of concern for you and your family. An expert
will be able to give you advice about trusts and accounts you can set up for your
child.
Finding answers to hard questions about finances can ease worries about
your child’s future. The steps below can help you get started:
Talk to a financial planner and/or a lawyer
- Many law firms and life insurance companies have special needs consultants.
- Make sure to find one who is skilled in special needs trusts and planning.
Write a letter of intent
- Some parents have found it helpful to write a draft letter of intent, or simply jot down their concerns before meeting with a planner or lawyer to write the letter of intent.
Establish guardianship (and successors) if needed
- A Guardianship and Alternatives is a legal relationship in which a person is designated by law to make choices for another person.
- The guardian is appointed by a judge to act in support of someone who cannot manage his or her own affairs.
- Guardianships are often thought of as something for children, as they cannot make legal decisions for themselves, but guardianships also can be used to protect adults with disabilities.
- If you are planning to care for your child after they turn age 18, you will need to set up guardianship.
- Talk with a special needs consultant about guardianship choices.
Consider your child's financial needs
- You can project your child’s financial needs by using a Special Needs Calculator for Estate Planning before meeting a planner or attorney.
Special Needs Trusts
One way of providing for your child with special needs is through a
Special Needs Trust (SNT). Also called a “supplemental care trust,” an SNT is a
legal way to make sure that the assets you leave to your child are available when he
or she needs them. An SNT gives your child use of funds, while the assets are
handled responsibly. This section explains SNTs: their benefits, proper uses, and
how you can fund an SNT for your child. It also goes over revocable trusts, which
can be set up along with your child’s SNT.
What are the benefits of a Special Needs Trust?
The services and funds through government programs, such as Medicaid,
are helpful for medical and long-term care, but the income from these programs
is quite fixed, often leaving many unmet needs. If you leave money to your child
in a traditional will, it is looked at as an asset, disqualifying your child
from any public benefits if the amount is too high. All the money in the will
must be used before your child’s eligibility will be restored. This would leave
only those funds from government benefits for your child’s long-term care and
other expenses. To be sure that the money you leave for your child can be used
for their needs, and that public benefits such as Medicaid will continue, the
assets must be placed in the SNT and set up the right way.
What are acceptable uses for SNT funds?
The SNT must be designed clearly to add to, not replace, government
benefits. Money from the trust cannot be given to the person with a disability.
Instead, it must be transferred to third parties to pay for the needs of the
person with a disability. The SNT may be used for expenses such as those
Medicare and/or Medicaid will not cover:
- Out-of-pocket medical and dental expenses, nutritional needs, eyeglasses Rehabilitation/therapy
- Transportation (public or private), car maintenance, insurance
- Personal care aide or escort • Hobbies, recreation, sports, entertainment, travel or vacation
- Assistive technology, computer or electronic devices
The trust may NOT be used for food, shelter, and clothing. When
setting up the trust, make sure to work with a lawyer who has experience with
these type of trusts and is familiar with how the money can be used.
How can I fund an SNT for my child?
Some ways of funding a special needs trust are:
- Insurance
- Savings and investments, such as money in retirement funds
- Support and gifts from friends and family members
- Property, such as a family home
- Military benefits
The money in the trust can be invested and earn money without limits.
The assets and earnings belong to the trust, not the child.
Who will serve as trustee for your child?
Choosing the right person or people to handle your child’s SNT is a
key step. The trustee will be in charge of spending the money, knowing the laws
that govern it, and completing all tasks, like filing taxes and balancing the
account. Some states allow 2 trustees, check with the state you live in for SNT
guidelines. The trustee(s) may be:
- A family member, such as a sister or brother (some states do not accept family as trustees)
- A lawyer
- A trust manager
What is a Revocable Trust?
A revocable trust is an added fund you can set up along with your child’s
SNT. You can set up this trust while you’re living, but you are allowed to make
changes to it as you see fit. A revocable trust is of great value if you set it up
with your will. Your assets can be funneled into the trust automatically upon your
death, without the costly and time-consuming process of a will. Another advantage of
this is that other family members, like grandparents, can also use the trust to gift
money to your child.
ABLE Accounts
Another good option for saving money and not losing benefits is an ABLE
account, which is only the cost of securing a bank account. ABLE accounts come from
the ABLE Act, which amends Section 529 of the Internal Revenue Service Code of 1986
to create tax-free savings accounts for people with disabilities. By making tax-free
savings accounts available to cover qualified disability-related expenses (including
education, housing and transportation), this law aims to ease financial strains
faced by people with disabilities. Additionally, the funds added to these accounts
will not negatively impact the person’s eligibility for public benefits, such as
Medicaid. The funds in these accounts don’t replace benefits provided through
private insurances, the Medicaid program, the Supplemental Security Income program,
the beneficiary’s employment and other sources. Instead, the funds supplement these
benefits. For more information on ABLE Accounts and how to set one up, go to:
ABLE National Resource Center.
Resources
Information & Support
For Parents and Patients
Financial Planning for Kids with Special Needs
Offers details about financial planning specific to special needs, including ten steps to planning your child's financial
future. The site also translates to Spanish.
Planning Your Child's Future
A planning guide for parents and guardians with information about special needs trusts and much more by the Pacer Center.
Special Needs Alliance
This is a national nonprofit organization of member attorneys who work regularly with planning for special needs. The site
has up to date content and a “search for an attorney” tool.
Financial Planning Mistakes Special Needs Families Should Avoid
Gives advice about things parents might not think of when planning, including seven mistakes to avoid.
Services for Patients & Families in New Mexico (NM)
| Service Categories | # of providers* in: | NM | NW | Other states (4) (show) | | NV | OH | RI | UT |
|---|---|---|---|---|---|---|---|---|---|
| Estate & Future Planning | 2 | 2 | 2 | 2 | 9 | 4 | |||
| Guardianship | 8 | 2 | 6 | 2 | 4 | 6 | |||
For services not listed above, browse our Services categories or search our database.
* number of provider listings may vary by how states categorize services, whether providers are listed by organization or individual, how services are organized in the state, and other factors; Nationwide (NW) providers are generally limited to web-based services, provider locator services, and organizations that serve children from across the nation.