SPECIAL NEEDS PLANNING
Special Needs Estate Planning focuses on providing for the special needs of our loved ones with disabilities when we are no longer there to advocate on their behalf or assist in their day-to-day care. There are many reasons why parents of special needs children should be very careful with their estate planning. There are the issues of guardianship and the unending challenge of evaluating the resources (both government and private) that may be available to maximize the quality of life for the child. Fortunately, there is an effective planning tool available that will provide for your loved one with disabilities now and after your death.
Special Needs Trusts are created specifically for the benefit of those with physical and/or mental disabilities, including those with mental disabilities who lack the capacity to manage their own finances. The specific needs, lifestyle, and future of the beneficiary are important factors to keep in mind when creating a Special Needs Trust.
There are two types of Special Needs Trusts:
First-Party (Self-Settled) Special Needs Trust: Generally created by a parent, grandparent, legal guardian, or the Court using the child’s assets to fund the Special Needs Trust (e.g., when the child receives an inheritance or a settlement from a personal injury lawsuit and will require lifelong care), but they can also be created by the child himself or herself if he or she is age 18 or older and has sufficient mental capacity. If assets remain in the Trust after the child’s death, a “payback” to the state is required, reimbursing the state for the Medicaid (TennCare) benefits received by the beneficiary during his or her lifetime.
Third-Party Special Needs Trust: This type of trust is often created using the assets of the parent(s) or other family member or donor, but never including assets of the person with special needs. It can be created as part of the overall estate plan of the parents or created as a stand-alone trust. When the beneficiary with special needs dies, any funds remaining in the trust can pass to other beneficiaries (family members), or to a charity, without having to be used to reimburse the government.
Other tools that may be appropriate in some situations are ABLE (Achieving a Better Life Experience Act of 2014) Accounts or Pooled Trusts. Planning ahead for the care of dependents struggling with disabilities requires time, research, and patience. You will want to keep up-to-date on the latest medical, educational, financial, and legal changes. The Estate Planning Center is here to provide assistance to you and your family in addressing your unique concerns, including providing you with information about local and state resources designed specifically for children and adults with special needs.