Special Needs Estate Planning Tips
Estate planning for a special child or adult is one of the ways you can fulfill the joy even when you’re not there. Your care and love should outlive you by securing the beneficiary's future.
These tips can help you plan for the estate of a special needs beneficiary. No matter the level of disability or age, these ideas can help you provide for them not only financially but also emotionally.
1. Don't Disinherit the Beneficiary
There is a common belief that an inheritance can reduce the public assistance a special needs individual can receive. However, disinheriting them is a cruel approach because it disadvantages them in terms of receiving benefits.
You can use trust instruments and proper planning to help them receive the benefits they’re entitled to while preserving their inheritance. Setting up a special needs trust guarantees the beneficiary a decent life even if public assistance is terminated.
2. Know the Difference between "Means-tested" and Worker's Employment History-based Government Benefits
A means-tested benefit is a type of benefit received by individuals in need and who have limited assets or income. On the other hand, workers' employment history-based benefits come from programs such as Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).
These two types of government benefits can affect an individual differently based on the size of their estate. So, you need to understand the differences and plan accordingly.
3. Know your SNT Facts
An SNT (special needs trust) is set up for individuals with special needs. It provides financial support to them without affecting their benefits from means-tested programs or other state and federal benefits. An SNT can be divided into two categories:
· Third-party special needs trust
· First-party special needs trust
A third-party SNT is funded with the assets of someone other than the beneficiary, such as parents or grandparents. A first-party SNT is usually created if a special needs individual has inherited assets.
4. Select a Trustee for SNT
You can use different approaches to select a trustee. The most common one is choosing a family member or close friend. These people know the beneficiary better and can make decisions based on their needs.
Other options include selecting a professional trustee, such as an attorney or accountant, with experience managing trust funds for special needs individuals. They charge a fee for the services but can provide important guidance and assistance.
5. Determine an Appropriate Distribution of Estate Assets to Fund an SNT
What is the fair share of a special needs beneficiary? Whether you want to distribute your wealth equally or consider the beneficiary's needs is difficult.
The best approach is to consider the needs of each beneficiary, whether that be equal or not. Factors such as the type of disability and its effect on quality of life should be considered.
6. Coordinate Beneficiary Designations with the Rest of the Planning
Beneficiary designations are often overlooked in estate planning for special needs individuals. Your decisions concerning life insurance, IRAs, and 401(k)s must be coordinated with the rest of your special needs planning.
These designations are essential to ensuring that the beneficiary's financial and emotional needs are met.
7. Create a Group of Professionals to Secure the Future of the Beneficiary
A lot goes into creating an estate plan for a special needs beneficiary. That's why it's important to assemble a team of professionals who specialize in this area.
The team should include an attorney, a financial planner, a life care planner, an advocate, and an insurance advisor. Together they can guide setting up the trust, managing investments, protecting assets from creditors, and taping into public benefits.
8. Appoint a Legal Guardian for the Beneficiary
When a special needs child is 18, you should qualify as a court-appointed guardian. This will give you the legal authority to make decisions on behalf of the beneficiary.
A legal guardian manages the beneficiary's finances and makes decisions on their behalf. You should choose an individual who will act in the best interest of the special needs child.
9. Encourage Estate Planning by Adult Children with Disabilities
Many adults with special needs are in a position to plan for their assets. If an adult child can sign wills and disability documents, you should encourage them to exercise this right.
You can provide guidance and support throughout the process. Ensuring they understand the importance of creating an estate plan and giving them the tools to do so can help ensure their financial security in the future.
By following these special needs estate planning tips, you can be confident that your loved one's future is secure. With careful consideration and preparation, you can provide for them even when you’re gone.
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