Estate planning can be difficult in the best of situations. If you have a special needs trust for a child, this planning can get to be even more complex.
Unfortunately, many people fail to plan properly – and they pay the price. A recent article in Kiplinger details how a special needs trust for a child can fall apart simply because an ex-spouse or other family members failed to properly shelter assets.
If you have a special needs child, it’s critical to strategize with an estate planning attorney. Families also should learn about all the support programs that exist – federal, state, local, charitable and other nonprofit support programs.
The Kiplinger article details a fictional scenario involving a mother of a disabled child who was juggling several issues that affected the special needs trust:
- The mother needed to find a replacement for a resigning trustee
- The mother relied on child-support payments from her ex-husband, who recently died
- The ex-husband failed to include a proper beneficiary designation for the disabled child’s share of his company retirement plan and did not make a proper disposition in his last will to shelter his daughter’s share of his estate.
As a result, the disabled child’s SSI benefit was going to be reduced. The Kiplinger article describes that trusts must be included as income or available resources – and that can result in the reduction of eligibility for means-tested benefits unless certain rules are followed.
Working with an estate planning attorney is critical if you have a special needs trust
In the fictional scenario, the mother’s attorney explores a strategy to place the funds from her ex-husband’s estate into a new special needs trust for the child. The new trust would not be subject to federal reimbursement rules. The attorney also considers setting up a rollover IRA and Qualified Income Trust, which means the ex-husband’s retirement plan will not reduce the child’s SSI payment.
The mother still has other costs, including housing for her and her child, which would not be addressed by the attorney’s plan. Those costs, however, could be covered by public assistance programs such as Supplemental Nutrition Assistance Program (SNAP) and others.
Key takeaway for parents with special needs trusts
Parents should learn about nonprofit support programs that could help cover costs for a disabled child. They also should talk to relatives who may want to include the disabled child in their will. They will need to understand eligibility rules.
Special needs trusts require planning. No one wants the trust to fall apart when events happen, such as the death of a family member. When the stakes are high – and they always are with special needs trusts – it’s smart to have an experienced attorney at your side. We can help you make the choice that's best for you and your family. Contact Hocker & Associates LLC, your lawyers for life.