Planning for the future is an essential responsibility for any parent, but for those with a special needs child, it takes on a heightened level of importance. At NW Legacy Law in Vancouver, WA, our experienced estate planning lawyers understand the unique challenges and considerations that come into play when creating an estate plan for a child with special needs. This blog post aims to provide guidance on how to navigate these complexities and ensure your adult child’s future is secure.

How to Provide for a Special Needs Child in Your Estate Plan

Understanding the Importance of Estate Planning

When you have a special needs child, traditional estate planning considerations must be adapted to suit their particular requirements. The primary goal is to provide for your child throughout their lifetime while also ensuring they retain access to vital government benefits such as Supplemental Security Income (SSI) and Medicaid.

Without proper planning, your well-meaning intentions might inadvertently disqualify your child from these essential supports. Therefore, it’s crucial to work with an estate planning lawyer familiar with the specifics of this area as you craft your estate plan.

How Do I Start?

Get Organized

Before anything else, make sure that you are prepared to be organized. Being organized is essential for estate planning with a special needs child as it ensures comprehensive planning that addresses all aspects of your child’s care, facilitates clear communication among family members and guardians, and helps meet legal requirements to maintain eligibility for benefits like SSI and Medicaid.

Effective organization allows for efficient asset and legal document management, prepares you for emergencies by ensuring quick action in case of incapacity or passing, and simplifies the process of reviewing and updating the plan as circumstances change. Furthermore, it increases the likelihood that your wishes will be honored and fosters collaboration within a support network, ultimately providing peace of mind and security for your child’s future.

Steps To Provide for a Special Needs Child in Your Estate Plan

1. Implement A Specials Needs Trust

One of the primary tools in estate planning for a special needs child is the establishment of a Special Needs Trust. This type of trust allows you to set aside funds for your child’s care without jeopardizing their eligibility for government benefits. The trust can cover a wide range of expenses such as medical care, education, housing, and personal care—ensuring a higher quality of life for your special needs or disabled child.

There are several Special Needs Trust options including

Third Party Special Needs Trust

A third-party special needs trust is established with assets that belong to someone other than the individual with disabilities, such as a parent or family member. Its characteristics include:

  • Setup: Created by a parent, guardian, or family member using their own funds.
  • Ownership: The trust holds assets belonging to the third party, not the beneficiary.
  • No Payback Requirement: Upon the beneficiary’s death, there is no requirement to pay back Medicaid; remaining funds can be distributed according to the trust’s terms.
  • Purpose: Allows family members to provide for their loved one with special needs without affecting their eligibility for government benefits.

First-Party Special Needs Trust

A first-party special needs trust is established with the assets of the individual with disabilities, often funded by their own resources, such as an inheritance or settlement from a lawsuit. Key characteristics include:

  • Setup: Created by the individual, a parent, or legal guardian.
  • Ownership: The trust holds the beneficiary’s own assets.
  • Medicaid Payback: Upon the beneficiary’s death, the trust must reimburse Medicaid for services provided during their lifetime before any remaining funds can be distributed to other beneficiaries.
  • Purpose: Allows individuals to maintain eligibility for public assistance while using trust funds for additional care and expenses.

Pooled Special Needs Trust

A pooled special needs trust is a type of trust that combines the resources of multiple beneficiaries into a single trust managed by a nonprofit organization. Key features include:

  • Setup: Established and managed by a nonprofit organization for the benefit of multiple individuals with disabilities.
  • Ownership: Each beneficiary has a separate bank account within the trust, but assets are pooled for investment and management purposes.
  • Medicaid Payback: Similar to first-party trusts, upon the death of the beneficiary, Medicaid is repaid for services received. Remaining funds can be distributed per the trust’s rules.
  • Purpose: Provides a cost-effective way to offer professional management of funds while allowing individuals to maintain their eligibility for public benefits.

At NW Legacy Law, we can assist you in establishing a Special Needs Trust that complies with local laws and meets your child’s needs.

ABLE Accounts

Another option is to create an ABLE (Achieving a Better Life Experience) account. It’s a specialized savings and investment account designed to help individuals with disabilities save money for disability-related expenses without affecting their eligibility for government benefits like Medicaid and Supplemental Security Income (SSI).

Key features of ABLE accounts include:

  1. Tax Advantages: Contributions to an ABLE account grow tax-free, and withdrawals used for qualified expenses are also tax-free.
  2. Eligibility: To qualify for an ABLE account, individuals must have a disability that occurred before the age of 26 and must meet certain criteria outlined by the states.
  3. Contribution Limits: There are annual contribution limits, which vary by state (up to $15,000 for 2021). Additionally, if the account balance reaches $100,000, SSI benefits may be suspended until the balance drops below that threshold, but Medicaid eligibility remains intact.
  4. Qualified Expenses: Funds from an ABLE account can be used for a wide range of expenses, including education, housing, transportation, health care, and other disability-related costs.
  5. State-Specific Programs: ABLE accounts are established and maintained at the state level, meaning features and investment options can vary from one state to another.

Overall, ABLE accounts provide a valuable financial tool for individuals with disabilities and their families, allowing them to save for future needs while maintaining access to essential government benefits.

2. Choose a Trustee or Power of Attorney

Selecting a trustworthy and competent trustee or power of attorney to manage the Special Needs Trust is critical. This person will be responsible for making distributions from the trust for your child’s benefit, so they should understand the nuances of special needs planning and the importance of maintaining the child’s eligibility for public assistance.

Consider family members, close friends, or professionals familiar with the requirements of the trust. In Vancouver, local financial advisors or community leaders sometimes make excellent candidates due to their understanding of community resources available.

3. Have a Detailed Plan for Guardianship

In the unfortunate event of your passing, it’s vital to ensure your special needs or disabled child will be cared for by someone who understands their needs. Appointed guardians should be individuals who have a deep understanding of your child’s capabilities, preferences, and requirements. Haing a trusted guardian who can navigate these options and access community support resources is invaluable.

Start Planning Today

At NW Legacy Law, we understand the unique challenges and considerations involved in estate planning, particularly for families with special needs children. Our team is dedicated to providing personalized guidance to help you navigate the complexities of establishing trusts, ABLE accounts, and creating a comprehensive plan that secures your child’s future. We believe that every family deserves peace of mind knowing their loved ones will be cared for, no matter what the future holds.

If you’re ready to take the next step in protecting your child’s future and ensuring their needs are met, contact us today to schedule a consultation. Let us help you create a tailored estate plan that reflects your values and provides for your special needs child.