We all hope to live long lives, but sudden illness or accidents are impossible to predict, so it’s never too early to start making sure your loved ones will be taken care of when you’re gone — especially if you have a child with special needs.
Unfortunately there are common mistakes people make when planning for the future that could cost a special needs child in the long run. Here’s how to make sure that he is provided for in case something happens to you.
MISTAKE 1: Disinheriting the child. Many disabled people rely on Supplemental Security Income, Medicaid or other government benefits to provide food and shelter. You may have been advised to disinherit your disabled child (the child who needs your help most!) to protect that child’s public benefits. But these benefits rarely provide more than subsistence, and this “solution” does not allow you to help your child after you are incapacitated or gone. When your child requires — or is likely to require — governmental assistance to meet his basic needs, you should consider establishing a Special Needs Trust.
MISTAKE 2: Ignoring the special needs when creating a trust for the child. A trust that is not designed with your child’s special needs in mind will probably render your child ineligible for essential benefits. The Special Needs Trust is designed to promote the disabled person’s comfort and happiness without sacrificing eligibility.
Special needs can include medical and dental expenses not covered by Medicaid, cutting-edge or non-traditional treatments or therapies, necessary or desirable equipment (such a specially equipped vans), training and education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive computers, books, games, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses — the sorts of things you now provide.
MISTAKE 3: Creating a “generic” Special Needs Trust that doesn’t fit your child. Even some Special Needs Trusts are unnecessarily inflexible and generic. In most cases, an attorney with some knowledge of the area can prevent a trust from invalidating the child’s public benefits; however, many trusts are not customized to the child’s specific needs. As a result, the child fails to receive the benefits that the parents provided when they were alive.
Another mistake is when lawyers put a “pay-back” provision into the trust, rather than allowing the remainder of the trust to go to others upon the death of the special needs child. These pay-back provisions are necessary in certain types of Special Needs Trusts — and not necessary in others. An attorney who knows when they should be used can save your family hundreds of thousand of dollars, or more.
MISTAKE 4: Procrastination. Since no one knows when they will die or become incapacitated, it is important to plan for your special needs child early, just as you would for other dependents, such as minor children. Unlike other beneficiaries, your special needs child may never be able to compensate for your failure to plan. A child without special needs can obtain more resources as he reaches adulthood, and can work to meet essential needs. Your special needs child may not have that opportunity.
MISTAKE 5: Failing to invite other people to contribute to the trust. A key benefit of creating the trust now is that your extended family and friends can make gifts to the trust or remember the trust as they plan their own estates. In addition to the gifts and inheritances from other people who love your child, you can leave your own assets to the trust in your will. You can also name the trust as a beneficiary of life insurance and retirement benefits.
MISTAKE 6: Choosing the wrong trustee. During your life, you and your spouse can manage the trust. When you and your spouse are no longer able to serve as trustee, the person or persons you specify in the trust instructions will become the new trustee, such as a professional trustee or a team of advisors. Make sure that whomever you choose is financially savvy, well-organized, and ethical.
MISTAKE 7: Relying on your other children to use their money for the benefit of your special needs child. This can be a temporary solution, such as during a brief incapacity, if your other children are financially secure and have money to spare. However, because of the potential problems, this solution will not protect your child after you and your spouse have died, or when siblings have their own expenses and financial priorities. For example:
• What if your child with the money divorces? His or her spouse may be entitled to half of the funds and will not likely care for your special needs child.
• What if your child with the money dies or becomes incapacitated while your special needs child is still living? Will his or her heirs care for your special needs child as thoughtfully and completely as your child with the money did?
• What if your child loses a lawsuit and has to pay a large judgment or has other creditor problems? The court will certainly require your child to turn that money over to his or her creditors.
When you create a Special Needs Trust, you protect all of your children. The trust facilitates easier record-keeping and allows your other children to rely on the assistance of a professional trustee, if needed. Siblings of a special needs child often feel a great responsibility for that child, as they have all of their lives. When you provide clear instructions and a helpful framework, you lessen the burden on all of your children and build a loving, involved relationship that benefits your child with special needs.
MISTAKE 8: Failing to protect the special needs child from predators. Thieves, con men and other criminals look to take advantage of those who are most vulnerable, like your special needs child. A child trapped in the system with precious little resources and without anyone to look after his affairs can easily fall prey to these predators. When you establish a Special Needs Trust and properly structure your estate plan to protect your special needs child, you ensure that your child will never be left alone, will always be provided for, and will always have a trustworthy person — either a guardian or trustee, or both — watching over him.
Joe Donlon is an Estate Planning Attorney who has in-depth experience working with parents who have a special needs child. He offers the free article, “7 Key Questions Parents Should Ask About Special Needs Trusts.” To receive a free copy, send an e-mail to joe@donlonlaw.com.
