Do you have a child or someone in your family with either physical or mental conditions that would label them special needs? Then chances are your going to face a lot of challenges with their well being and care, especially within the financial side. You also might have other people in the family who’ll want to mean well by trying to help. But did you know that you may have to not accept it? Because by accepting their help, this could cause monetary problems for that special needs loved one?
I’ve got some good news. You can avoid major pitfalls by planning ahead. I’m sure you already know by having a family member with special needs qualifies you for some government benefits. They also can have access to local programs that provides assistance with housing, medial needs, independent living, job training, specialized equipment and other services. One problem that often arises is that in order to be eligible for these programs, you family needs to meet a financial requirement. This is mostly a non-issue if your loved one has little income and few assets.
Though another issue debuts a lot that I see all the time. This is when relatives like grandparents will want to include those with special needs as a beneficiary in their own estate plan. This can include being beneficiaries of insurance policies or retirement assets. This is because if that loved one with special needs receives a large amount of assets or sudden increase in finances, they could be ruled ineligible for important services.
This is where my first tip is to communicate with your relatives with their own plans as well as your own. This is a good chance to see if they decided to be…generous with what they want to give away. If it appears so, then you can use that opportunity to tell them you appreciate the thought, but there are better ways to structure the gift so that it can be more valuable and wont cause problems.
More specifically, they can place the asset or gift into a special needs trust, either one already created in your estate plan or a separate one. What a special needs trust does is that its crafted to help those with special needs to use financial assets or inheritances that can be used for a lot of things while keeping their eligibility for government programs.
There are two types of special needs trusts:
- First-part special needs trust. An individual with special needs, their legal guardian or the court can establish a first-party special needs trust benefiting that individual. The first-party special needs trust is funded by the individual’s own assets, either through earnings or an inheritance. A first-party trust contains a “payback” rule, which means that when the individual beneficiary with special needs dies, the trust must pay back the state for certain benefits received.
- Third-party special needs trust. A relative or person other than the individual with special needs who wants to include that individual in their estate plan can set up a third-party special needs trust. The third party trust is funded with assets from someone other than the individual with special needs. With a third-party trust, no “payback” provision is required.
Having an estate plan created for a special needs trust can be a complicated and even scary process. It doesn’t have to be. It just takes some influence with your family and keeping communication channels open. The law offices of Jeffrey C. Nickerson can help with that. Click on the button before to contact us for more information on how we can help your family, your loved one with special needs and the future.