If you’re the parent of a child with special needs, then proper estate planning is essential to ensure that your child will always be cared for the way you want them to be. Estate planning can help you:
- Provide for your loved one without jeopardizing their eligibility for public support like MassHealth, Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), and other government benefits
- Supplement your child’s benefits and enhance their quality of life
- Make sure sufficient funds are available to care for your child
- Provide for the proper supervision, management, and distribution of an inheritance for your child with special needs
As the parent of a child with special needs, or a child who has been injured or disabled, you need to ensure an inheritance or settlement to the child does not threaten their entitlement to public benefits. These benefits can be an important component of their lifetime income, however they rarely adequately provide for all of a person’s needs.
Special Needs Trusts
A special needs trust, also known as a “supplemental needs trust,” can be established on behalf of a person who is mentally or physically incapacitated under the Social Security Administration’s definition of disability to preserve both the public benefits and any additional inherited or awarded assets. There are two types of these trusts: third-party trusts are established by a parent or loved one for the benefit of a special needs child; self-settled trusts are created with the child’s own assets, often an inheritance or settlement.
Assets in a special needs trust are distributed to the beneficiary at the discretion of a trustee; typically, a parent or loved one. A successor trustee is also chosen and will serve in the event the trustee passes away before the beneficiary. The trust can’t pay for basic needs which are covered by government benefits and programs. Since government agencies impose strict rules and requirements on special needs trusts, families should consult an experienced attorney to guide them through the process of setting up the appropriate trust.
Funding a Trust
Families must consider how to fund the trust and at what levels. Funding must be realistic in relationship to the needs of the child. If a family doesn’t have enough resources to adequately fund a trust, one option may be to consider funding it with life insurance.
The ABLE Act
The Achieving a Better Life Experience (ABLE) Act allows individuals with disabilities and their families to save funds in tax-exempt savings account—income earned by and contributions made to the account aren’t taxed. The money in these accounts can be used for qualified disability expenses, and doesn’t apply to the income and asset limits for SSI and MassHealth. To open an ABLE account, an individual must have become disabled before age 26.
Individuals may have only one ABLE account, and total contributions to that account, including from family members and friends, are limited to $14,000 per year. The funds may be used for expenses, such as housing, education, transportation, health care, and assistive technology.
For more information and guidance on estate planning related to caring for a child with special needs, call us at (617) 299-6976 or send an email to firstname.lastname@example.org.