Financial Planning for Special Needs Children

Last updated on: October 3, 2023

Estate planning presents unique challenges for families with special needs children. In maximizing your estate’s potential for use, enhancement, and enrichment while maintaining your special needs child’s enrollment in public benefits programs, careful planning is necessary. To accomplish these and other goals for your child, a special needs trust can be prepared by an estate planning attorney.

Navigating the intricacies of securing your special needs child’s future can be overwhelming, but a Houston special needs trust attorney can guide you every step of the way. At The Law Office of Whitney L. Thompson, our attorneys can create tailored solutions that ensure your child’s lifelong care, while maximizing benefits and protecting assets. Contact us today at 281-214-0173 to learn more about why you should consider a special needs trust for your child.

A special needs trust can meet strict financial eligibility rules for means-tested assistance programs because the assets held in the trust are not directly available to the child. A trustee provides benefits to the child via the trust. Parents select this trustee with great care because they will act as the child’s money manager, ensuring proper financial supervision after the parents die. A letter of intent is also a powerful tool to guide the trustee to make decisions that best benefit the child’s unique needs.

In most cases, your special needs child will benefit by selecting a non-family member who is independent to act as your special needs trustee. The range of options includes:

  • A parent, sibling, or another relative, which can be risky,
  • An estate planning attorney,
  • A financial institution or a trust company,
  • A non-profit organization, particularly one with special needs experience, or
  • Co-trustees, such as a trust company, acting in conjunction with a family member.

Each option has advantages and disadvantages that require close counsel with your estate planning attorney or financial advisor before selecting your trustee.

The creation of your special needs trust can happen while you are living or at the time of your death. A last will and testament can incorporate creating the trust, known as a testamentary trust. Parents often set up the trust while alive, known as a living trust (inter vivos trust). The living trust has advantages, including the avoidance of probate, the permission for other family members to make trust contributions (usually grandparents), and the opportunity for a co-trustee to experience what it is like to administer the trust.

Whether or not your trust is revocable or irrevocable affects tax consequences. Generally, you’ll want to choose a revocable trust if the goal is to maintain maximum control over the trust and income tax considerations aren’t a concern. Establish an irrevocable trust when there are concerns regarding income tax consequences, particularly if the trust funds exceed one million dollars. In this instance, both federal estate and gift taxes may apply to the trust.

While there is much to consider and decide, the crucial step to providing for your special needs child is to make it legal. Verbally telling your family how to care for your child is insufficient. In the absence of a will, testamentary trust, or living trust, the state in which you live will determine the outcomes of your estate’s distribution. This situation is not a viable option for a special needs child or any of your children.

Receiving proper legal guidance to implement your estate plan using appropriate trusts is crucial to maintaining a healthy lifestyle for your special needs child. Do not attempt to craft these legal documents on your own, use existing forms, or copy some internet template. Each special needs child requires careful considerations that are unique to them and the challenges they face moving forward. With so much at stake, a qualified estate planning attorney with expertise in special needs planning will best suit your wishes and the child’s needs. Protecting public benefits such as Supplemental Security Income (SSI) and Medicaid and establishing a special needs trust through your estate planning can best achieve these goals.

What Happens to Special Needs Adults When Their Parents Die?

When parents of special needs adults pass away, there are several potential scenarios that can occur, depending on the individual’s situation, available support systems, and the legal arrangements in place. Each case and each scenario is unique, and the outcome may vary based on factors such as the individual’s level of independence, the severity of their disability, and any existing care arrangements.

When preparing for the future of your special needs child, it’s crucial to address the following key areas:

  • Ensuring Stable Living Conditions: Securing a stable and suitable living environment in advance for your child is most important in ensuring their welfare.
  • Utilizing Available Public Benefits: Explore available public benefits, such as Medicaid, as a means to cover living expenses and essential needs.
  • Considering Guardianship for Adult Children: Depending on your child’s age, it might be necessary to pursue guardianship to ensure their legal protection and well-being as an adult.
  • Establishing a Special Needs Trust: Creating a special needs trust can provide a reliable way to allocate funds that will cover expenses beyond what public assistance covers.

Parents should take into account various aspects, including financial requirements, housing arrangements, transportation, social interactions, and other factors that contribute to a fulfilling life. While public funds like Medicaid can offer financial assistance for certain living costs, housing, and medical needs, they may not comprehensively address all of your child’s desires and necessities.

To provide a comprehensive safeguard for your child’s future, crafting an estate plan that specifically accounts for their special needs is the most effective approach. This ensures that financial resources are available to support their well-being, dignity, and quality of life even in your absence.

Discover how a Houston special needs trust attorney can provide invaluable support in ensuring the well-being and security of special needs adults even after their parents pass away. At The Law Office of Whitney L. Thompson, our attorneys can create tailored legal solutions that ensure your child’s financial security, medical care, and overall well-being even after you’re gone. Contact us today to schedule a consultation.

What Do You Need a Special Needs Trust Attorney to Assist You in Preparing Your Plan?

To be non-countable, the trust must first be correctly drafted and managed by an attorney who specializes in special needs trust law. These are just a few of the factors and issues that must be considered before drafting a special-need trust.

  • Age of beneficiary
  • The nature of the disability, and its expected duration
  • The functional abilities and limitations of the beneficiary
  • Future living arrangements and future needs
  • Eligibility for government benefits
  • Future needs anticipated by the beneficiary
  • Available financial resources

Types Of Special Needs Trusts

Third-Party Special Needs Trusts

An individual other than the beneficiary can create a third-party special needs trust. This could be a grandparent or parent. A family member might make provisions in their will to establish a special need trust after their death. They can also create an independent special needs trust that their parents and other relatives can add to during their lives.

First-Party Special Needs Trusts

The beneficiary’s assets are used to fund the first-party trust for special needs. A first-party special need trust is often established after an individual receives a substantial amount of money through an inheritance or a lawsuit.

Support Trusts

While a support trust can be similar to a special need trust in many ways, there are some important differences. A support trust is different from a special needs trust in that the trustee must make payments to cover expenses for food and shelter. Beneficiaries of support trusts aren’t eligible for Social Security benefits or Medicaid benefits. This makes them less suitable for anyone who is currently receiving or plans to be receiving these benefits.

We hope you found this article helpful. Please contact our Houston office at 281-214-0173 or the Bay City office at 979-318-5079 today and schedule an appointment to discuss how we can help you with your legal matters.

Types Of Special Needs Trusts Description
Third-Party Special Needs Trusts Created by someone other than the beneficiary, often a grandparent or parent. Can be established in a will or independently during their lifetime. Relatives can contribute to the trust.
First-Party Special Needs Trusts Funded with the beneficiary’s own assets, often after receiving a substantial amount through inheritance or a lawsuit.
Support Trusts Similar to special needs trusts but with differences. Payments must cover food and shelter expenses. Beneficiaries may not be eligible for Social Security or Medicaid benefits.

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