Special Needs Planning

If you have a child with disabilities, you know that planning for the short term is how to stay on top of meeting your child’s unique daily needs. Just as important, however, is developing a plan for how your child will be cared for in the future when you are no longer around to provide that care. There are several considerations to make when engaging in special needs planning.

This type of planning generally refers to the maintenance of means-tested public or government benefits. Usually, this involves SSI and Medicaid, but there could also be state-based programs like food stamps, Supplemental Assistance, or other agencies that provide resources to disabled individuals, whether children or adults, plus the maintaining of eligibility for those benefits.

Special needs planning is a part of estate planning in which the parents of a disabled child set up the legal documentation necessary so that the child’s care will be legally transferred to another authority at the time of their death. Financial support and inheritance for the child will be provided in a manner that will not result in a loss of government benefits that the child receives for care. The documents and actions often involved in planning for your disabled child include the following.

The Creation of Special Needs Trusts

A trust is a form of ownership of a property, investments, or other assets in which a trustee manages the asset for the benefit of someone else. A special needs trust allows the inheritance of a disabled person to be managed by a professional to ensure that the disabled person continues to meet the financial eligibility criteria to continue receiving their disability benefits or supplemental security income.

The Development of a Care Plan for the Disabled Child (Letter of Intent)

As its name suggests, this is a form of planning in which a document is created that guides a future caregiver in providing care for your loved one. The document generally begins with your loved one’s daily routine, required medications, life goals, and plans. You can add or change the information contained in the document over time as your disabled child’s needs and desires change. In addition to providing a handbook that someone can use to step in and provide daily care for your child, the document is a good starting point for determining what other plans need to be put in place.

Creating an ABLE Account for Your Child

This tax-advantaged account allows families to build up savings for their children without harming their eligibility for benefits programs. The contribution is tax-free if the money taken from the account is used for qualified disability expenses, such as rent, food, transportation, education and employment training, health care, or personal support services.

What Are the Benefits of Special Needs Planning?

The benefits are generally means-tested, meaning there must be a financial necessity to receive them. While disability is a threshold requirement, the person has to be disabled to the point where they can’t support themselves and can’t achieve what’s called “substantial gainful activity” if they’re an adult. Suppose they are a child with marked or severe impairments that will not resolve themselves for 12 months or result in death at some point. In that case, planning allows us to protect eligibility for public benefits and medical care in the future, regardless of what happens in life.

When Should I Start Special Needs Planning?

As medical advances continue to prolong the lives of those with severe health issues, it’s becoming more common for disabled individuals to outlive their caregivers. Unfortunately, it’s not uncommon for families to fail to put a special needs plan in place to provide care for their disabled child until they’re faced with an emergency, such as their health concerns or the loss of a spouse. The truth is, if you have a special needs child who will require a higher level of financial planning and support throughout their life, it’s never too early to start the special needs planning process.

Who Needs Special Needs Planning?

Special needs planning is crucial for those with a physically or cognitively disabled child or other individuals under their care for whom they are responsible for providing financial support and assistance with daily care tasks and who benefit from their estate upon their death. It is also helpful for the family’s support network of providers, caregivers, and friends so that everyone is on the same page regarding the care of the disabled person in the event of their parent or guardian’s death. Not only does planning resolve issues of money management and asset protection, but it is also essential to discuss guardianship: getting someone appointed, whether that be a parent, relative, or third party, to make legal decisions on behalf of an incompetent individual – generally someone who is disabled and cannot make decisions for themselves.

What Does Special Needs Planning Involve?

When discussing eligibility, there are two main factors at play. SSI and Medicaid both require not only meeting the disability threshold but also that a person has below a certain level of assets. Countable assets are generally assets other than a personal residence, one vehicle, and the things required for support and daily activities. Countable assets usually are liquid accounts (such as checking/savings accounts). Essentially, if you have certain assets, they should be used for your support first, and Medicaid or SSI should be the payer of last resort for these sorts of needs and benefits. Special needs planning maintains and preserves those benefits in the event of an unexpected inheritance or gift to the beneficiary. The way to structure the planning is to ensure that an inheritance or gift goes to a beneficiary’s trusts 529(a) or ABLE account instead of going directly to them. The assets that go to them, whether by inheritance or gift, are not received now by or available to the beneficiary. They are being held for that beneficiary’s benefit, either by the trustee of the trust or by a guardian on a 529(a) Account (529(a) and ABLE are the same thing, but can be used interchangeably).

Who Are Special Needs Planning Not Right For?

If you are a family with substantial means and a high net worth and can afford to self-fund the treatment for this individual, then special needs planning may not be the best option for you. The nature of ownership in special needs planning is in a protected capacity—one where the beneficiary does not have direct access to the assets. If they don’t necessarily need to preserve means-tested benefits, it may be a disservice to put those assets into a protective capacity that deprives ownership and full use. Otherwise, that person could pay for their needs individually—over and above what they would generally get from SSI or Medicaid. It may be in the person’s best interest to allow them full access to those assets.

Do I Only Need To Create Special Needs Trusts?

Special needs planning encompasses more than just the creation of special needs trusts or a 529(a). It’s looking at the totality of the circumstances – the entire comprehensive plan – and ensuring that financial aspects are involved. It is essential to make sure that everything is coordinated with a certified financial planner and CPAs so that everyone is on the same page and that the legal aspects are married with or collaborative with financial planning so that if something does happen, unexpectedly or not, the disabled individual should have the funding to support themselves throughout the rest of their life. Part of that is working with financial advisors and planning out what is called a “life care plan” to forecast what types of medical expenses they could encounter that may be over and above what their benefits may cover or if Medicaid is lost or removed entirely.

Do I Need a Lawyer for Special Needs Planning?

Having an experienced special needs lawyer on your side is an integral part of special needs planning. An attorney can provide assistance that includes:

  • Assistance in creating trusts or other accounts that will allow you to provide a financial planning safety net for your loved one
  • Guidance as to the different federal and state benefit programs and how to set up regular contributions for your loved one’s care without impacting their eligibility for those programs
  • Establishment of a care plan that will allow an individual to step in and take over daily care of your special needs child in the event of your death
  • Knowledge of the creation of other legal documents necessary to ensure the continuity of your loved one’s care
  • Access to other resources around the community, such as organizations or specialists that can be of benefit to the client and their special needs family member

Contact us immediately to speak with an estate planning attorney and begin planning for your disabled family members.