All families need a comprehensive estate plan. However, families with a special needs child have additional factors to consider. A well-meaning parent can unintentionally disqualify a child from needed government benefits if the correct estate plan is not in place.
Government programs that provide support for individuals with special needs include Supplemental Security Income (SSI), Social Security Disability Insurance (SSD), Medicare, and Medicaid. Individuals who meet certain income and asset limitations qualify for SSI and in most states, including Texas, those receiving SSI are automatically eligible for Medicaid. However, if your special needs child receives an inheritance outright, your child risks losing access to essential programs and benefits. With the correct estate plan in place, you can ensure that your child’s future is secure and protected.
Crafting A Special Needs Estate Plan
A well-designed estate plan that takes into consideration the unique vulnerabilities of a special needs child can provide a lifetime of assistance without jeopardizing access to much needed benefits. With the correct estate plan in place, you can ensure your loved one is well taken care of long after you are gone and this can give you peace of mind for the future.
Special Needs Trusts are an essential estate planning tool for families with a special needs child. Depending on your family’s specific circumstances and goals, some of the available options are:
Beneficiaries of this type of trust are not eligible for SSI or Medicaid. Families that rely on SSI or Medicaid should avoid support trusts. The Trustee of a Support Trust is in charge of the Trust once you are gone and is required to make distributions in support of your child’s food, shelter, clothing, medical care, educational services, and other needs.
Special Needs Trusts
There are two types of Special Needs Trusts that can ensure your child remains eligible for SSI and Medicaid.
- Third-Party Special Needs Trusts
This type of trust is funded with the assets of a third party—normally the parents, grandparents, or other loved ones who invested in caring for your special needs child. A Trustee is named in the Trust to oversee the funds in the Trust after you are gone. Parents can leave specific instructions regarding how distributions should be made to the beneficiary. As the beneficiary of a Third Party Special Needs Trust, your child will not be at risk of losing access to the government benefits available to them.
- Self-Settled Special Needs Trust
A Self-Settled or First Party Special Needs Trust is created by a parent, grandparent, legal guardian or the court, using your child’s assets (e.g. a settlement from a lawsuit or an inheritance). The Trust must be established before the beneficiary reaches age 65. The funds in the Trust are used for your child’s benefit throughout their lifetime, without jeopardizing their eligibility for SSI and Medicaid. Upon the beneficiary’s death, any funds remaining in the Trust must be used to reimburse Medicaid in an amount equivalent to the benefits used during the beneficiary’s lifetime.
The attorneys at the Hailey-Petty Law Firm will work with you to create a comprehensive estate plan, including special needs planning for your child. We will use estate planning tools to develop a plan that avoids disrupting public benefits that your special needs child is receiving and maximizes the benefits they are eligible to receive. We will also use various estate planning tools to ensure your special needs child will not be dependent solely on the government in the future. We are there to guide you through this process and develop a comprehensive estate plan to protect your child’s future.