Q & A with Attorney John Haslam: Special Needs Planning

What is special needs planning? 

People planning for beneficiaries with a special needs must address the following concerns:

  • How will financial benefits be used for their benefit?
  • Who will control and manage financial assets?
  • How can an estate plan be arranged so that the beneficiary with special needs can benefit from inherited assets for the rest of their life?
  • If the beneficiary is receiving government benefits, how can money be left to them without jeopardizing those benefits?
  • Money may very easily be exhausted in an ill-advised and rapid fashion.
  • Will there be circumstances when the beneficiary can assume control over inherited assets?

Why can’t money be given directly to a beneficiary with special needs? 

For those beneficiaries who receive government benefits, keeping them will depend on the financial resources at the beneficiary’s disposal.  Generally speaking, the beneficiary will lose access to government assistance if he or she has access to other resources.  For those who do not receive benefits but have other special circumstances, like bad spending habits or substance addictions, unlimited access to money can result in dire consequences.

Why shouldn’t a beneficiary with special needs be disinherited? 

By disinheriting a beneficiary with special needs, he or she will not be able to benefit from the additional resources that may be crucial in allowing that beneficiary to lead a fulfilling life.  Simply leaving the assets to someone else is not often a workable solution, since that person is under no obligation to use the funds for the beneficiary.  Furthermore, should that person die, get divorced, file bankruptcy or get sued, those funds cannot be set aside and protected for the beneficiary.

What is a special needs trust? 

A special needs trust is a trust that holds assets for the benefit of a beneficiary with special needs.  It is specifically designed to provide for the beneficiary’s needs and expenses without the risk that the funds will be wasted or exhausted needlessly. In most states, a special needs trust will not affect a disabled beneficiary’s eligibility for government assistance as long as the trustee has the sole and absolute discretion to determine the amount, purpose and method of distribution.

What are common mistakes in planning for a Special Needs beneficiary?

          Mistake: Disinheriting the child. Many disabled people rely on SSI, Medicaid or other government benefits to provide food and shelter. Often families have been advised to disinherit their disabled child – the child who needs their help most – to protect that child’s public benefits. But these benefits rarely provide more than basic needs. And this “solution” does not allow them to help their children after the rest of the family becomes incapacitated or is gone. When a child requires, or is likely torequire, governmental assistance to meet his or her basic needs, parents, grandparents and others who love the child should consider establishing a Special Needs Trust.

        Mistake: Ignoring the special needs when planning for the child’s benefit.Planning that is not designed with the child’s special needs in mind will probably render the child ineligible for essential government benefits. A properly designed Special Needs Trust promotes the special needs person’s comfort and happiness without sacrificing eligibility.

Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (for example, a specially equipped van), training and education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive spending money, electronic equipment & appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses: the sorts of things their family now provides to their child.

Posted in: Estate Planning, Family Planning, Special Needs Planning