Estate planning, by its very nature, involves making important decisions about the future, often dealing with substantial assets and the well-being of loved ones. It’s a process that can be intricate, filled with numerous choices, and it requires careful consideration of various factors. For individuals and families who are either living with special needs or have loved
ones who require special care, estate planning becomes an even more intricate puzzle, with unique considerations and challenges.

When facing the task of estate planning for someone with special needs, several specific questions and concerns tend to emerge, which may not be as prevalent in standard estate planning scenarios:

Financial Management for the Special Needs Individual: What if my child or loved one with special needs won’t ever be able to independently manage their own finances? This question is a core concern because it touches on the financial security and independence of the individual.

Preserving Eligibility for Government Benefits: How can I set aside money for my special needs adult child without jeopardizing their eligibility for government benefits like Supplemental Security Income (SSI) or Medicaid? This question highlights the delicate balance that must be struck between securing their financial future and ensuring continued access to vital government assistance.

Windfalls and Eligibility: What if I receive a large cash bequest or inheritance that could jeopardize my Supplemental Security Income or other government benefits? In these situations, the sudden influx of assets can trigger disqualification from much-needed assistance.

Trusts and Medicaid Disqualification: What if I am the beneficiary of a trust that disqualifies me from Medicaid or other essential support programs? Trusts can be complex, and their management can significantly impact a beneficiary’s eligibility for critical services.

These are some of the challenging and often overwhelming questions that arise when planning for individuals with special needs. However, there are legal tools and strategies available to address these issues and provide a more secure financial future for those with special needs.

One of the primary tools in this endeavor is the Special Needs Trust (SNT). Special Needs Trusts are specifically designed to hold and manage assets for individuals receiving government benefits without jeopardizing their eligibility. They accomplish this by placing certain restrictions on the use of the trust’s assets, which is why they are not considered “countable” assets for government benefits purposes.

These restrictions primarily revolve around when and how the assets within the trust can be used. For example, beneficiaries of an SNT typically do not have the right to withdraw or demand funds from the trust at their discretion. Instead, a trustee is appointed to manage the assets on their behalf and make decisions regarding their use. Additionally, SNT assets can only be used for the beneficiary’s “supplemental needs,” such as medical expenses, support services not covered by benefits, education, and recreational activities.

SNTs come in two primary forms: Third Party SNTs and First Party SNTs.

Third-party SNTs are typically set up by a family member or relative for the benefit of the individual with special needs. These trusts often have no limits on the amount of assets they can hold, and they do not require reimbursement to the government after the beneficiary’s passing.

First-party SNTs, on the other hand, are established by the special needs individuals themselves, using their assets. These trusts are often utilized when an individual becomes disabled due to an unexpected event and needs to reduce their countable assets to qualify for government benefits. However, First Party SNTs must include provisions for reimbursing the government for benefits received during the beneficiary’s lifetime.

Choosing between these types of SNTs and understanding which is appropriate for your specific situation is a crucial part of the estate planning process for special needs individuals.

Additionally, the Achieving a Better Life Experience Act of 2014 (the “ABLE Act”) introduced another essential tool in the realm of special needs planning: ABLE Accounts. ABLE Accounts function as bank accounts, akin to 529 Plans, and allow special needs individuals or their families to make after-tax contributions to cover various expenses without jeopardizing government benefits eligibility. These accounts are particularly helpful for basic living expenses, housing, transportation, legal fees, healthcare, and educational costs.

While ABLE Accounts offer simplicity and ease of use, they do come with contribution and asset limits, and eligibility criteria must be met. The amount that can be contributed annually varies, but it allows for financial flexibility within the given limits.

It’s important to recognize that estate planning for special needs individuals isn’t a one-size-fits-all endeavor. The choice between SNTs, ABLE Accounts, or a combination of both will depend on the unique circumstances and needs of the individual and their family.

Proper planning for individuals with special needs is a matter of ensuring not only financial security but also peace of mind for everyone involved. It’s often advisable to consult with an experienced attorney at RAXTER LAW, P.A. (951) 226-5294 who can advise you regarding special needs planning to navigate the complexities of these tools and create a comprehensive plan that addresses the specific requirements and aspirations of your loved one.

In conclusion, while estate planning for individuals with special needs can be challenging, it’s a necessary and profoundly rewarding endeavor. By using the appropriate legal tools and strategies, you can ensure a brighter and more secure financial future for your loved one while preserving their access to essential government benefits.