Children with special needs require a lot of attention and care, so parents need to be extra careful when planning their future so as not to make any plans that will put their child in jeopardy or have a serious, long-lasting effect on the child.
In some instances, when the child grows, he or she may not be able to qualify for vital benefits from the federal government or the parents might die without making monetary provisions for the child. This article is centered on parents of special needs kids and the mistakes they make when planning their estates.
1. Disinheriting the Child
When children with special needs reach adulthood, they tend to rely on the federal government to help with their fundamental needs like food and shelter. This is often done through federal means-tested programs (a program in which the recipient’s financial resources determines the eligibility) like Supplemental Security Income (SSI) and Medicaid.
Parents are often advised to disinherit their child to enable them to qualify for the federal programs. This advice is not really the best for a special needs child because these federal programs offer very low finances. A special needs child may not be able to work to get additional money to help out like their counterparts who do not have special needs.
It is more advisable for the parents to open a Special Needs Trust (Supplemental Needs Trust) for their child. The parents can put money in the trust for their child without any risk of disqualifying the child from benefitting from federal programs.
Other family members or well-wishers can also leave money in the trust or set up another one. Also, if the parents die or become impaired, the child’s trust will be able to support the child.
A Special Needs Trust needs to be set up by an experienced attorney to avoid complications. It is important not to do it on your own; an attorney can help you align your life insurance, retirement accounts, and other beneficiary accounts with the Special Needs Trust of your child.
Parents need to plan in advance for a time when they’ll die or simply won’t be able to cater financially for their child. Since nobody knows what could happen tomorrow, the earlier we plan, the better we can secure our children financially. Parents who do not plan ahead could die and end up leaving their special needs children with no resources to maintain the standard of living they were used to. Especially for parents who own businesses or do freelance work, setting up automatic systems for taking care of business concerns needs to be done today, not tomorrow.
3. Not Making Your Planning a Team Effort
Parents cannot work alone when making an estate plan for a special needs child. The process is very complex and therefore requires the services of people experienced in special needs planning to make sure the plan goes well. They need an attorney with experience in special needs, a life insurance professional that will help plan the money needed to increase the benefits needed for the child, a CPA to prepare the tax return of the trust, an investment adviser to manage the finances so that the money in the trust fund will last for the whole of the child’s life, and also any other advisers that may be able to help in the success of the trust.
4. Ignoring the Particular Needs of a Special Needs Child
Plans that are focused on the particular needs of a special needs child have to be made. If the planning doesn’t meet their needs, the child will not qualify for government benefits. Setting up a proper Special Needs Trust will satisfy the child’s needs and also allow the child to be eligible for benefits. The trust must satisfy a lot of needs, like medical bills, annual check-ups, any special equipment (like a specially equipped van), training, education, insurance, transport, and feeding.
A properly funded Trust will go much further in providing the child with electronic equipment, appliances, and computers, fund vacation trips for them, allow them to go to the cinema and have a good living situation, and provide many other things that a parent wishes for their child to improve their quality of life.
A generic or “form” special needs trust has very strict distribution policies, and so the child may not be exposed to some things that he or she would normally have enjoyed.
5. Including a “Payback” Provision in the Trust
Payback in the trust means that if the child dies, any money remaining in the trust is given to the government and not the family. This payback clause is a mistake made by most parents. An experienced attorney can be employed to make sure that money left goes to the family instead of the government.
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