Planning for Family Members with Special Needs

Category: Estate Planning

Do you have a mentally or physically disabled family member? If so, giving money to that family member, or leaving it to him or her in your Will, without considering the consequences of that action, could cause that person to lose benefits and actually become less secure then before the money was transferred to them.

If a person is mentally or physically disabled, the federal government, the state, and private organizations may all provide aid to this person. Many times, qualification for this aid depends on the person's assets and income. Just giving the person money could actually disqualify him or her from benefits that they are already receiving, including jobs and housing benefits.

Furthermore, if a person is disabled, can he or she manage money? If not, is there a Guardian or other person who should be the manager?

With proper planning, the special needs of a disabled individual can be easily met. A "Special Needs Trust" or "Supplemental Needs Trust" can be created to manage any gift or inheritance in such a manner that the disabled person continues to be eligible for benefits and aid, but has an additional nest egg of assets. The trust can be created as a separate trust document or in your Will. A "Special Needs Trust" or "Supplemental Needs Trust" typically describes a trust where the Trustee is granted unlimited discretion in making distributions to the beneficiary, with the caveat that the distributions should be made in such a manner as to not jeopardize any other benefits and aid the person might be receiving. For example, instead of giving the beneficiary money to purchase a new home, the trust could purchase the home and allow the beneficiary to live there.

If your child is incompetent, and they are an adult, it is critical that you become the child's Guardian. First, this grants you the legal authority to make decisions on behalf of your adult child. Second, it establishes the need for the Guardianship - if you were to die, would another person know where all the medical history is to easily establish the need for the Guardianship in court? Third, it allows you as the Guardian to suggest to the court who an appropriate successor Guardian might be.

Regardless of all the critical reasons to do special needs planning, if you haven't taken any steps to date, you are not alone. A survey discussed in the article Financial Planning For Kids With Special Needs - Forbes.com found:

* 88% of parents who have children with special needs haven't set up a trust to preserve eligibility for benefits such as Medicaid and Supplemental Social Security.

* 84% haven't written a letter of intent outlining an agreement for the future care of the child.

* 72% haven't named a trustee to handle the child's finances.

* 53% haven't identified a guardian for their child.

These statistics are scary in that the failure to plan will result in an additional burden and costs for the disabled person and his or family.