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Special Needs Estate Planning - What You Need to Know

Families with special needs children must put extra thought into creating their estate plans. Learn more about special needs estate planning here.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

One of the biggest worries parents have is ensuring their children will be taken care of and provided for, even after they are gone. This concern is especially true for parents of special needs children, who must ensure long-term financial support and medical care. For this reason, special needs Estate Planning is a crucial step when thinking ahead. 

With a thorough Estate Plan, parents can ensure their children are well provided for while also maintaining enrollment in public programs that may give additional support. A common strategy is to create a Special Needs Trust, which can help create peace of mind about the future. Keep reading to learn what to consider when creating an Estate Plan for special needs children of all ages:

What is Special Needs Estate Planning?

Special needs Estate Planning is the process of creating a Will or Trust with the intention of providing lifelong support for a special needs child. Because many special needs children receive benefits from public programs, such as Medicaid or Social Security Income (SSI), there are specific considerations to make when creating an Estate Plan. 

Parents can approach special needs Estate Planning in a number of ways, though many share the same goals: to preserve public benefits eligibility, provide lifelong financial support, and ensure proper management of available funds. Without the right Estate Plan in place, these responsibilities could be left up to family members with different priorities, or in some cases ignored completely. This puts special needs children at risk of losing critical financial support. 

Estate Planning for special needs children of all ages is often best accomplished through the creation of a  Special Needs Trust. This will help the child continue to qualify for necessary public benefits programs, while ensuring they have additional financial support. The creation of a Special Needs Trust also allows parents to appoint a Trustee, who can manage the funds on behalf of the child. This can be an additional layer of protection and assurance that the child will be well taken care of in the future. 

Does a Special Needs Child Need a Trust When They Become an Adult?

A special needs child may need a Trust when they become an adult to assist with financial management and long-term support. With a Special Needs Trust, a Trustee is responsible for dispersing funds when needed which can help maintain the child’s eligibility for public programs. Special Needs Trusts can go into effect at any time (until their 65th birthday) and will last throughout their life or until the funds are fully depleted. 

In some cases, families may opt to include an inheritance for a special needs child in their Will rather than creating a Trust. This is often an appropriate solution if the size of the inheritance is relatively small and will not interfere with public support programs. However, this option will not provide the same form of long-term financial management as a Trust. 

What Can the Funds in a Special Needs Trust Be Used for?

The funds included in a Special Needs Trust can be used for a number of expenses, which is why many families opt for this form of Estate Planning. Trusts are often a form of supplemental financial support and can be used to provide resources not included in existing public benefits. That being said, the Trust must have enough available resources to cover these costs. 

As a whole, funds in a Special Needs Trust can be used for housing and transportation costs, additional medical care, educational supplies, clothing, furniture, and more. Essentially, funds in a Special Needs Trusts are utilized to increase a child’s quality of life. Read through our guide on Special Needs Trusts for more comprehensive information on how these funds can be used. 

How Much Money Can be Put in a Special Needs Trust?

The amount of money in a special needs trust could range from $10,000 to $1,000,000+ depending on the assets available at the time of its creation. There are costs associated with creating a Trust and for its long term management, so many advise starting with at least $100,000. However, the exact amount necessary will depend on a number of factors. 

Parents interested in creating a Special Needs Trust are encouraged to estimate an annual budget for the care of the child. Consider any income in the form of public benefits, and then begin to calculate annual costs. Think about housing, medical, education, and other expenses that you currently assist with. This can provide a loose outline for how much support they will need annually. From there, you can estimate how much money you may want to include in the Trust. 

When Should You Set up a Special Needs Trust?

There are two main ways to set up a Special Needs Trust. First, parents can incorporate a Trust into their Estate Plan which will go into effect after their deaths. This process is called a testamentary Trust and is one option for providing long-term peace of mind for your child’s future. When administered correctly, this can prevent your child’s inheritance from interfering with their public benefit eligibility. 

The second option is for parents to create a Special Needs Trust while they are alive, called a Living Trust. There are a few different benefits to this option, namely the ability to avoid probate. This also allows other family members, such as grandparents,  to make contributions to the Trust. Finally, creating a Special Needs Trust can enable parents to place some financial responsibilities in the hands of the Trustee. 

The best time to create a Special Needs Trust will depend on the situation. While many parents may advocate for the creation of the Trust while they are still alive, others may not be able to fund such an arrangement until their entire Estate Plan takes effect. If you are unsure where to begin, reach out to our team of Estate Planning experts for help. 

Create Your Special Needs Estate Plan Today 

The purpose of special needs Estate Planning is to ensure your child has lifelong financial support, even after you are gone. There are numerous Estate Planning tools that can help you ensure your child is well taken care of, and that a trusted individual is placed in charge of the child’s financial affairs. By taking the time to plan carefully, you can provide peace of mind for the entire family about the future. 

Perhaps the most common example of special needs Estate Planning is the creation of a Special Needs Trust, which can be done in your Will or while you are still alive. These Trusts, when administered correctly, will help maintain your child’s eligibility for crucial public benefits programs and provide additional support where necessary. Reach out to us today to learn exactly how you can get started building an Estate Plan with your special needs children in mind, no matter what age they are. 

Being a parent is often unpredictable, but there are ways to plan ahead for your children's futures. With special needs Estate Planning you can provide valuable support to your special needs child over time. This process can create invaluable security and peace of mind for you and your family. 

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