Eight Costly Mistakes to Avoid When Planning for Special Needs Children.
One: Disinheriting the child.
Many disabled people rely on Social Security, Medicaid or other government programs to provide food and shelter. You may have been advised to disinherit your disabled child to protect these benefits, but the fact is they rarely provide more than subsistence. Your disabled child counts on you more than anyone else for protection, and the “solution” of disinheritance does not allow you to help your child after you are incapacitated or gone.
When your child requires (or is likely to require) governmental assistance to meet basic needs, you should consider establishing a Special Needs Trust.
Two: Ignoring special needs when creating a trust for your child.
A trust that is not designed with your child’s special needs in mind will probably render your child ineligible for essential benefits. The Special Needs Trust is designed to promote the disabled person’s comfort and happiness without sacrificing eligibility.
Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (like specially equipped vans), training and education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive spending money, electronic equipment and appliances, computers, vacations, movies, payments for a companion, as well as a wide range of additional self-esteem and quality-of-life enhancing expenses. That is, the type of things you provide right now.
Three: Creating a generic special needs trust that doesn’t meet your child’s specific needs.
Even some so-called special needs trusts are generic and, as a result, inflexible and incapable of meeting specific needs. Although an attorney with some knowledge of the area can protect almost any trust from invalidating the child’s public benefits, many trusts are not customized to the particular child’s situation. The result is that the child does not receive the benefits that the parents provided when they were still alive.
Another common mistake attorneys without specific training and experience make is putting a “pay-back” provision into the trust rather than allowing the remainder of the trust to go to others upon the special needs child’s death. These “pay-back” provisions are necessary in certain types of special needs trusts, and an attorney who knows the difference can save your family hundreds of thousand of dollars.
None of us knows if we will become incapacitated or when we will pass away. So it is important to plan for your special needs child as early as possible, just as you would for other dependents such as minor children.
Unlike most beneficiaries, your special needs child may never be able to compensate for your failure to plan. A minor beneficiary without special needs can obtain more resources as he or she reaches adulthood and can work to meet essential needs. Your special needs child may not have these options.
Five: Failing to ask for others to contribute to the trust.
One of the best reasons to create a special needs trust now is that your extended family and close friends can make gifts to or remember the trust while they plan their own estates. You can also consider whether making the trust the beneficiary of a life insurance policy makes sense now, while you are healthy and insurance rates are low.
In addition to the gifts and inheritances from other people who love your child, you can leave your own assets to the trust in your will, as well as make the trust a beneficiary of life insurance or retirement benefits.
Six: Choosing the wrong trustee.
When you and your spouse are no longer able to serve as trustee, you can choose who will serve according to the instructions that you have provided. You may choose a team of advisors or a professional trustee. However, whomever you choose must be well organized, knowledgeable, and, above all else, trustworthy.
Seven: Relying on your other children.
While it is possible to rely on your other children to provide for your special needs child from their own inheritances, this should only be regarded as a temporary solution, such as during a short incapacity. It will not protect your special needs child after you and your spouse have died, or when siblings’ financial situations change.
For instance, what if the child with the money divorces? His or her spouse may be entitled to half of it and will likely not care for your special needs child. Moreover, you should consider the possibility of lawsuits by creditors against the child that you have relied upon to take care of your special needs child. In the event such a lawsuit results in a judgment against your child, a court will require that your child turn over the money that you intended for your special needs child over to the creditor.
The bottom line is this: If you create a special needs trust, you protect all of your children. The trust facilitates easier recordkeeping and allows your other children to rely on the assistance of a professional trustee if necessary. Siblings of a special needs child often feel a great deal of responsibility for that child and have felt this way for all of their lives. When you provide clear instructions and a helpful structure, you lessen the burden on all of your children and support a loving and involved relationship between them.
Eight: Failing to protect your special needs child from predators.
Funding your child’s special needs trust by will rather than revocable living trust means information will be in the public record. Predators are particularly attracted to vulnerable beneficiaries, such as the young and those with limited self-protective capacities. Trusts allow you to decide who has access to the information about your children’s inheritance, thereby protecting your child and other family members, who may be serving as trustees, from predators.