Special Needs Planning

Many of my clients have a child with intellectual and developmental disabilities.  These special needs children present a complicated estate planning concern for their parents.  The parents want to provide for their special needs child, but at the same time maintain governmental benefit programs for the child (SSI and Medicaid).

There are four basic estate planning options for parents in this situation.

First, leave a share of your estate directly to the special needs child.  The advantages of this plan are the following:  this is what you want to do; this is simple and inexpensive planning; you are leaving an inheritance for the child.  However, the disadvantages are all to obvious:  your child will be knocked off SSI and Medicaid until they have spent through the inheritance.

Second, you can disinherit the special needs child.  The advantages of this plan are the following:  this is simple and inexpensive planning; the child will continue to receive SSI and Medicaid; your estate will not be spent reproducing the benefits that are otherwise available through the public programs.  There are disadvantages to this plan as well:  you don’t want to disinherit the special needs child; the child may be aware of the disinheritance.

Third, you can do a morally obligated gift to another person for your special needs child.  In other words, your will gives the special needs child’s share to someone else, and they will use the funds for your child.  The advantages of this plan are the following:  this is simple and inexpensive planning; this maintains SSI and Medicaid benefits for the child; this sets the other person up to be a surrogate parent of sorts to your child; the person has maximum flexibility in the way the moneys are used for the child.  The only real disadvantage is that the person has no legal obligation to use the moneys on the child, and what happen to the funds when this person later dies?

Fourth, you can create a Special Needs Trust under your will.  In other words, your Will gives a share of your estate, IN TRUST, to a trustee to hold for your child.  The advantage of this plan is that it works.  The money can be held in trust for your child and he or she will continue to get SSI and Medicaid.  The disadvantages, however, must be considered:  the trust is complicated and more expensive to set up and run; and the money in the trust can only be used for the child’s special needs.

Our goal is to make sure that families with special needs children know all of their options.  We want to work with the families to create the very best estate plan as they consider the pros and cons of the various planning options.