Estate Planning for Families with Special Needs
Estate planning for special needs focuses on the future protection and support of individuals who are not able to care for themselves due to physical, mental, or emotional disabilities. This includes providing for their economic needs, personal care, healthcare, education, and ongoing supervision or custodianship. Estate planning for special needs also addresses the legal and financial issues that may arise from managing an estate for the benefit of a disabled individual.
Craig Associates, PC, hosts free estate planning seminars for novice estate planners and those who have dabbled in estate planning and want to deepen their understanding of how to maximize their estate plan. Register for an upcoming seminar or call us at 828-258-2888 for an initial case evaluation and to learn more about estate planning for special needs.
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Great response, this wonderful team went above and beyond to assist our family in a dire time of need. Mr. Chris Craig and his associates were wonderful, helpful, and timely. We are so blessed to have them as our representatives. The Craig firm is made up of individuals who see the need and reply with thoughtful advice. Our family is confident in the service and information provided by Mr. Chris Craig and his team. We were seeking advice on a family trust, Mr. Craig and his associates were able to answer all our questions and provide great direction. Asheville is very blessed to have such wonderful local talent!
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Common terms you may come across related to estate planning for special needs.
DFG (Disabled Facilities Grant): A grant to help make a home more accessible for someone with special needs.
Special Needs Estate: The collection of assets and plans tailored for an individual with special needs.
Home Adaptations: Modifications made to a home to make it suitable for individuals with special needs. These may include supported living, relevant works, or eligible works to accommodate specific needs.
Able Account: A tax-advantaged savings account for individuals with disabilities, often used in estate planning for special needs.
Discretionary Trust: A trust where the trustee has discretion over distributions, used to protect assets in estate planning for special needs.
Regeneration Act: Legislation that may affect housing and support for individuals with special needs.
Local Housing Authority: Local housing authorities are specific governmental organizations at the local level overseeing housing for special needs.
Housing Renewal Grants: Housing grants used for renovating or adapting housing for special needs.
SSI (Supplemental Security Income): A government program that provides income support for disabled individuals.
Third-Party: Refers to an individual or entity involved in estate planning for special needs but not directly related.
Means-Tested: A process where eligibility for financial support or benefits is based on income and assets, relevant in estate planning for special needs.
Down Syndrome: A genetic disorder that may require specific considerations in estate planning for special needs.
529 College Savings Plan: An investment plan used for education expenses, can be tailored for special needs education.
Social Security Income: Government benefits that may be part of an estate plan for individuals with special needs.
Do Not Resuscitate: A medical order that can be part of estate planning to state wishes for end-of-life care.
Conservators: Individuals appointed to manage the estate or personal care of someone with special needs.
401(k) Plan: Specific retirement savings plan, important in financial planning for those involved in caring for special needs and estate planning for special needs.
Required Minimum Distributions: The minimum amount that must be withdrawn from certain retirement accounts, relevant in estate planning for special needs.
Permanent Life Insurance: A life insurance policy that can be used to provide financial support for special needs individuals and often part of estate planning for special needs.
Supplemental Security Income (SSI): A government benefit providing financial support to disabled individuals, including those with special needs.
IRA (Individual Retirement Account): Retirement savings account considered in estate planning for special needs.
Inter Vivos Trust: A trust created during a person’s lifetime, often used in estate planning for special needs to protect assets.
Irrevocable Trust: A trust that cannot be altered without consent, commonly used in estate planning for special needs to protect assets and benefits.
The Importance of Estate Planning for Special Needs
The importance of estate planning for special needs lies in ensuring that the individual’s financial and personal well-being is preserved even when their primary caregivers are no longer in the picture. Without a proper plan in place, there is a risk that the disabled individual may not receive adequate care, or that their unique needs may not be fully met.
Also, their legal entitlements to government benefits could be jeopardized. Proper estate planning for special needs provides a safety net for the disabled individual while also providing peace of mind for the family members.
How to Approach Estate Planning for Special Needs
Special Needs Trust (SNT)
To begin estate planning for special needs, a great starting point is to establish a Special Needs Trust (SNT), also known as a supplemental needs trust. This is a legal entity that holds and manages assets on behalf of the disabled individual. The assets held in the trust are not counted as the disabled individual’s personal assets, thus preserving eligibility for public assistance disability benefits provided by Social Security, Supplemental Security Income, Medicare, or Medicaid. Special Needs Trusts can be designed to accommodate the particular needs, lifestyle, and preferences of the person with disabilities, providing for a better quality of life.
The appointed Trustee can be a family member, a trusted friend, or a professional fiduciary such as a bank or a trust company. The Trustee becomes responsible for managing the assets of the trust in the best interest of the disabled individual, including:
- Making distributions and investment decisions
- Record keeping and tax reporting
- Coordinating services for the beneficiary.
Other Important Documents in Estate Planning for Special Needs
- A Last Will and Testament: This outlines how you want your assets distributed when you’re gone.
- Trusts: There are many types of trusts, but they all function in essentially the same way. You transfer ownership of certain assets to the trust, which then manages those assets for the benefit of your chosen beneficiaries.
- Healthcare Power of Attorney: This allows you to delegate someone to make healthcare decisions if you become incapable of doing so.
- Financial Power of Attorney: This allows you to delegate someone to make financial decisions if you cannot for whatever reason.
- Living Wills or Advanced Directives: These documents permit you to express your desires about medical treatments or end-of-life care ahead of time.
Considerations for Estate Planning for Special Needs
Long-Term Care and Living Arrangements
Caregivers must acknowledge that their wards might outlive them, making it critical to structure a plan that ensures continued support and care. Estate planning for special needs may include long-term care options, such as home care, residential care facilities, or community-based programs. Proper estate planning for special needs also factors in dietary requirements, personal grooming, and emotional and psychological support to create a realistic long-term living arrangement.
Medical and Healthcare Needs
Individuals with special needs often have complex medical and healthcare requirements that demand specialized and consistent care. Estate planning for special needs should ensure access to proper medical care, specialists, and treatments. With the ongoing rise in medical and healthcare costs, it becomes paramount to establish a savings or investment plan that can cater to these future medical expenses.
Financial Management and Independence
Financial provisions for disabled people are crucial in estate planning for special needs for financial security and to promote maximum independence. Importantly, these provisions must be set up to enhance the person’s life while not compromising their eligibility for public benefits.
A professional estate planner can help ensure no part of estate planning for special needs is overlooked.
Strategies Used in Estate Planning for Special Needs
Life Insurance Policies
A life insurance policy can serve as an income replacement, and its payout can form a significant part of an estate that can be passed on to the special needs child. The life insurance death benefit can also be directed to a special needs trust.
Retirement Accounts
Retirement accounts could be structured as a payable-on-death account to transfer directly to the named beneficiary upon the account holder’s death, bypassing probate.
Another approach involves transferring the money from a retirement account into a special needs trust upon the owner’s passing. However, you should seek legal counsel to properly structure such an arrangement due to potential tax ramifications.
Real Estate and Other Property
Real estate and other properties can serve as a financial reserve in estate planning for special needs to provide additional financial resources for the special needs child’s long-term care and support.
Careful consideration of the ownership structure, tax liabilities, and management of these properties should be taken into account during estate planning for special needs.
How an Estate Planning Attorney Can Help
Apart from drafting wills, an estate attorney provides comprehensive estate planning services, such as setting up trusts, offering guidance through probate proceedings, helping with guardian or conservator appointments, or estate administration. The attorney may also assist in arranging for long-term care and offering expert advice on issues such as elder law, tax planning strategies, and gift tax laws which can influence your estate planning for special needs.
Estate Planning for Special Needs FAQs
What’s the role of guardianship in estate planning for special needs?
Appointing a legal guardian is an important part of estate planning for special needs; this person must be willing to and capable of making crucial decisions in the best interest of the individual with disabilities. The appointed guardians should preferably be familiar with the disabled person to help ease the transition of caregivers and the grief of losing a loved one. This is especially important for special needs children.
Is life insurance important in estate planning for special needs?
Yes, life insurance plays a significant role in estate planning for special needs. Policies should name the Special Needs Trust as the beneficiary, rather than the individual to protect the individual’s eligibility for public assistance.
What professionals are involved in estate planning for special needs?
A team may consist of financial advisors, estate planning attorneys, and tax professionals to ensure the establishment of a comprehensive plan.
Can a will substitute for a Special Needs Trust in estate planning for special needs?
A will can be a part of estate planning for special needs; however, it cannot substitute a Special Needs Trust altogether. Mistakenly leaving assets directly to the special needs individual in a will might render them ineligible for essential government benefits, which a Special Needs Trust can avoid.
Learn More About Estate Planning for Special Needs
Part of caring for your loved ones means having a clear, legally sound estate plan to ensure they are taken care of, should the unthinkable happen. The good news is, you do not have to go through this process alone. Let the experienced and compassionate estate planning lawyers at Craig Associates, PC make estate planning for special needs as quick and easy as possible. Call us at (828) 258-2888, contact us using the form below, or register for an upcoming free estate planning seminar today!
