Estate Planning for Special Needs Children: peace of Mind for Parents

I was recently re-visiting an article about estate planning for families with special needs children that appeared in October 2008 in the Wall Street Journal entitled “An Estate Plan Built for Special Needs.” The article, like so many others, highlights the statistics: that more than 41 million Americans, or almost 15% of Americans age 5 or over have some type of disability, according to 2007 census data. With so many disabled children, whether the disability is a learning disability, an autistic spectrum disorder, mental retardation, cerebral palsy or some other disability, what do parents do to be sure their children are taken care of after they are gone? What do parents do to lessen their anxiety about the future of their children? How do parents make sure that their special needs children will not become a financial burden on their other children or relatives?

Fortunately, parents can take some simple steps to make sure that their special needs children have both financial and personal security after their deaths. As a trusts and estates attorney who specializes in this area of the law, I often prepare “Supplemental Needs Trusts” for families with children with special needs. These trusts are designed to provide for “extras” for the special needs child, while still allowing him or her to qualify for available government benefits, such as Medicaid and SSI. For instance, the trust can pay for medical or dental care not covered by Medicaid, entertainment, vacations and so forth. The trusts can be created in the Wills of the parents or grandparents, in which case they come into existence after the parent or grandparent passes away.
They also can be created in a separate trust instrument created during life (an “inter vivos trust”) and can either hold assets immediately, or hold a life insurance policy on the parent. If the inter vivos trust holds liquid assets immediately, there would be funds immediately available to use for the special needs child. If the trust holds a life insurance policy, there would be no liquid assets in the trust until the death of the insured. In addition, if other family members, such as grandparents, are made aware of the inter vivos trust, they can provide in their own Wills for distributions to be made directly into this trust for the disabled grandchild, or can even make lifetime gifts to the trust. It generally is not desirable to leave property outright to a special needs child, as this could easily disqualify him or her from receiving government benefits.

Whether the supplemental needs trust is created under a Will or is created as an inter vivos trust, the parent would know that when they are no longer around, their special needs child is taken care of. With this simple planning, the parents of the special needs child have one less thing to worry about, and achieve some well deserved peace of mind.