Supporting Children With Special Needs Through Effective Estate Planning

You have a child with special needs and are worried that your child will not be able to support him or herself after you are gone. How should you and/or others provide benefits to your child with special needs? Here are some key questions and responses to this situation:

Question 1: How should you pass part or all of your assets to your child with special needs at your death? 

Answer: You should pass your assets to a child with special needs at your death in a special trust, commonly known as a Supplemental or Special Needs Trust (SNT). By having assets pass to this type of trust, the child will still be able to benefit from any means tested government benefits, without the assets in the SNT counting for qualification purposes. As a result, the SNT assets will be available to supplement (and not in lieu of) any benefits the government would otherwise provide for your child with special needs. Government benefits could include, among others, monthly income (SSI), medical benefits, various social services, and housing.

Question 2: What types of SNTs can be used for this purpose?

Answer: You can either have a separate SNT set up for your child with special needs under your estate planning documents (Will or Revocable Living Trust) or, for smaller amounts of wealth, a SNT account can be set up at a Community Pooled Trust (CPT). A CPT account is not as flexible as a separate SNT, but it can be a great option for smaller amounts of wealth.

Question 3: Should you set up and transfer assets to a SNT during your life to provide for your child with special needs? 

Answer: Likely no. If you retain your assets, you retain full control over them, and you can provide for your child as you wish throughout your life without any administrative costs or hassles related to a SNT.

Question 4: Other family members or loved ones would like to provide some assistance for your child with special needs as well. Should you set up a SNT now that they can all transfer assets to when they would like, during their lives or at their deaths? 

Answer: Likely no. Some attorneys recommend the creation of an irrevocable third-party SNT during your life to which multiple parties can contribute to benefit your child with special needs. While this idea sounds great in theory, it is normally not a great idea in practice. The bottom line is that you will need to limit the trust’s terms, such as who can serve as the Trustee, in order to avoid various tax issues, in addition to dealing with the costs and hassles of ongoing SNT administration.

The better answer is to normally set up a SNT at a Community Pooled Trust that can receive multiple contributions from various individuals or families. This type of SNT is low cost and low hassle. For the situation where, for example, a wealthy grandparent, would like to provide a significant amount to benefit your child with special needs, the grandparent and your child with special needs are likely both better off by creating a SNT in the grandparent’s own estate plan, either in their Will or Revocable Living Trust.

As always, if you have specific questions about planning for children with special needs or estate planning broadly, don’t hesitate to contact us at 678-720-0750.

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