Special Needs Planning
“Plan for what is difficult while it is easy, do what is great while it is small.” — Sun Tzu
A child becomes an adult at 18 and parents may no longer make decisions for him/her, despite the adult child suffering from certain disabilities. Power of Attorney, guardianship or other proceedings would be required in order for the parent to be appointed the authorized decision-making person.
Powers of Attorney are a great planning tool as long as the adult child with disabilities has capacity to understand his/her financial and personal affairs and execute said documents. If they lack capacity, guardianship may be appropriate, if no other supports are in place.
Legal Guardianship is a court proceeding in which the petitioner asks a judge to adjudicate an adult as a person with disabilities and appoint a decision maker for that person. There are two types: (a) guardianship of the person; (b) guardianship of the estate. Guardianship proceedings should be the last option of “last resort”, utilized only if it is determined that no other supports are in place to protect the person with disabilities.
Parents for children with disabilities know or will soon find out that the long term supports for their young adult children with disabilities that the communities have to offer are hugely underfunded if they still exist at all. When the school system leaves off, at age 22, the parents are the ones who most often have to pick up the long term care and on-going support and guidance for their adult children. Special Needs Planning is thus essential in order for these parents to provide on-going support for their adult children as well as obtain public benefits for them.
When should the Special Needs Trust (SNT) be established?
Parents should include an SNT in their estate plan as soon as they are aware of the nature and extent of the child’s/family members’s disability. The SNT does not have to be funded immediately, and in fact it often gets funded at the death of the grantor. Parents’/grandparents’ failure to properly plan may result in an inheritance passing directly to the adult with disabilities forcing that person to have a First Party Special Needs Trust with a pay-back provision created in order to maintain eligibility for public benefits.
Frequently Asked Questions
Usually people with disabilities receiving residential-related services paid by Medicaid must contribute toward the cost of their care with money from earnings or from other sources such as their SSI or Social Security Disability Insurance (SSDI) payments.
One way to help with financial security for your child with a disability is leaving the inheritance to a sibling or another family member and not the child with the disability, with the promise that funds would be in fact used for the child with the disability. The disadvantage is that the inheritance is subject to the creditors of that sibling or family member, and experience shows that most often than not the inheritance is not being used for the benefit of the child with a disability. Another way to provide for financial security for a child with a disability is by establishing a trust that holds funds of the grantor (the grantor is the person establishing the trust) left for the benefit of the child with disabilities. The trust would contain careful written instructions on when and how to use trust’s assets. A trust may be funded during life or at death.
In most cases naming a person with disabilities (not the Special Needs Trust) as a beneficiary on a life insurance policy, a 401(k) Plan, or UTMA account may disqualify them from government benefits or force them into creating a First Party Special Needs Trust with a pay-back provision.