MARCH 6, 2017 VOLUME 24 NUMBER 10
If you are parent to a child with a disability, you need to make sure your own estate plan deals with that status. Will your child be able to handle an inheritance? Will an inheritance disrupt his or her Social Security, medical care or other benefits? Most importantly, have you thought through what you might to to replace the important — and hard — work you do helping care for your child?
Of course, the same considerations can apply to grandparents, concerned family friends, and anyone else who wants to help benefit and protect the individual with a disability. Extended family members can, in fact, make a special gift to the overwhelmed parents of a person with a disability: they can help organize and implement the planning, and make the process easier for parents.
Special Needs Trusts
One important step will be establishment of a trust. The value of that trust will be two-fold, at least:
- The trust can provide for management of the money, possibly by professionals who have the skills and experience to handle investment decisions, tax filings, accounting and proper expenditures.
- The trust can also make direct payments for goods and services, preventing any reduction in public benefits available to help your child.
What kind of trust will be appropriate? Each trust can be tailored to the strengths and needs of the beneficiary, and to the types and extent of assets to be assigned to the trust. Most likely, however, the trust will give its trustee broad discretion about whether, when and how much can be distributed, and whether distributions are made to the beneficiary directly or to landlords, caretakers, utility companies, and vendors directly — thereby keeping the trust’s payments out of the direct control of the beneficiary.
There is a name for the kind of trust described here. It is usually referred to as a “special needs” trust — though that title does not need to appear in the trust’s name (or the body of the trust document). At Fleming & Curti, PLC, we regularly prepare special needs trusts for our clients, and understand the requirements and benefits.
Where can you find a lawyer who can help?
There are lawyers all over the country who focus on special needs planning. Many of the best-known and most experienced belong to the Special Needs Alliance, an invitation-only group of lawyers who have demonstrated proficiency and familiarity in the area. They are far from the only choice, but they are often a good place to start.
Where should your lawyer practice? If you are planning for an adult child with a disability, they might not live near you. If you are a grandparent or other family member, it is even more likely that the child with a disability does not live nearby.
If the special needs lawyer you consult with lives in your state, or the state of the child or grandchild, either one, the choice might be a good fit. A lawyer who belongs to the Special Needs Alliance will have contacts in both your state and the state of the child with a disability, so they will have the tools to make sure both states’ laws are properly accommodated.
Of course it seldom (if ever) makes sense to choose a lawyer who does not practice in one place or the other. It is less important to seek out an attorney close to your home, or near where the child with a disability lives. It can help if access to the lawyer — and her or his office — is convenient, though, so you probably want to start by looking for a nearby professional.
How the special needs trust works
Every special needs trust will be different, but some common themes predominate. The trust you establish for your child with a disability will (at some point) have its own tax identification number, though it might not need a number — or file any tax returns — until after your death. The trustee will then have obligations to report to the beneficiary, and to anyone else you specify, what income and expenditures the trust has experienced, one year at a time (or more frequently, as you may direct).
The trustee will also have to figure out how best to pay for things that benefit your child with a disability. That might mean paying directly for some things (like cable/internet service, auto repairs, companion services, etc.). It might also mean making larger purchases (like a new vehicle, or a motorized wheelchair, or … you can fill in the blank mentally) by a check to the provider. Your child, despite any disability, can be engaged in the decision-making, and a good trustee will encourage that. In fact, the trust can even provide that the trustee can make an annual contribution (currently limited to $14,000) to an ABLE Act account for the beneficiary — giving even more autonomy and direct benefit to your child with a disability.
But here’s the bottom line: you can’t start the discussion about how to adapt these generalities to your situation until you make that first appointment with the special needs planning attorney. Begin there. Call, make an appointment, collect your personal information, and prepare for a helpful discussion about how you can best provide for your grandchild, or child, with a disability.
