If you have children with special needs, making a customized estate plan is doubly important to protect both yourself and your child. With many other demands on your time, you may not realize that having a child with special needs fundamentally changes your estate planning requirements.
Government Benefits Requirements Drive the Need for an Estate Plan
Many children with special needs receive government assistance through programs such as Medicaid and Social Security. If your child does not receive assistance, he or she may need to seek it at some point in the future. Most benefits programs have either income or resource limits for participants, meaning that they cannot make much money per month or have much in savings. When participants are children, often their parents’ income counts for eligibility purposes.
If your family’s income or resources exceed the program limits, your child could lose the government benefits. As a result, your family might have trouble paying for health care or living expenses for your child. When your child gets older, he or she could lose benefits just by getting a part-time job. Gifts from well-meaning relatives directly to the child can also lead to lost benefits.
As a result, your family needs estate planning help so that your child continues to receive the benefits he or she needs (or can get them in the future). Unfortunately, some common estate planning structures such as revocable trusts will still jeopardize benefits eligibility. But you have several options that can help.
Estate Planning Structures When You Have a Child with Special Needs
Due to restrictions on income and resources, even setting up a standard trust for your child can cause him or her to lose government benefits. Distributions from the trust, or the ability to request distributions, may result in income attributed to your child that pushes him or her over the government’s limit. Instead, you can consider setting up a special needs trust (SNT) and/or an ABLE account.
A special needs trust document contains specific language and is set up in a particular way so that money kept in it does not count against eligibility for government benefits. There are two different types of SNTs, depending on whose money will be placed in trust. Relatives who want to give money to a child with special needs can contribute to a trust, instead of to the child directly. Further, you might consider setting up an ABLE account. This is a tax-advantages savings account for someone with special needs. You can use ABLE account funds to pay for some types of expenses that SNT funds cannot cover by law.
If you need to start an estate plan due to a child with special needs, reach out to a local estate planning attorney for assistance. Estate planning laws affecting children with special needs are complex, but your lawyer can break them down for you.
Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.