The popular view of estate planning involves a “typical family” of a Mother, Father, and children. In this “typical situation” a cookie-cutter approach to estate planning may be perfect. The parents, as Settlors, may set up a Revocable Living Trust for their family naming themselves as Trustees and the children as Beneficiaries. Eventually anything held in trust will be distributed to the Beneficiaries according to the instructions of the Settlor. Probate will have been avoided, and the Beneficiaries will go about their “typical lives” having benefited greatly from the Trust. The problem with this view is that so many families do not fit the cookie-cutter approach to estate planning. With numerous family structures and situations, one size does not fit all. One group in particular must take a different approach to estate planning: families that have children with physical or mental disabilities. These families face specific challenges from the very moment they learn that their child will live with some type of disability. Whether the child is born with a disability, or whether the disability is the result of an accident, proper estate planning can aid the family in providing for disabled children for the duration of their lives.
One way to provide for children with disabilities in the long term is to establish a Special Needs Trust. A Special Needs Trust is just that: a Trust established to aid someone with special needs. It is similar to most other types of trusts in that a Settlor, probably the parents of the disabled child, will establish the trust. The Trust will have beneficiaries. And, of course, a Trustee must be named to manage the Trust.
One important difference between the “typical” estate planning situation and planning for a Special Needs Trust involves naming a Trustee. Parents may first think to name themselves, however it is important to understand that the disability will likely last for the duration of the child’s life. In some situations, the parents will pass away years or even decades before the child passes away. Settlors must consider this possibility in naming Trustees for a Trust. Professional Trustees can be an option that would ensure that a Trustee is living during the entire life of the child; however the Professional Trustee will also be compensated at professional rates. Another option is to appoint a family member that might be a sibling of the child with the disability, or some other closely related and trusted family member that is likely to live as long as, or longer than, the child.
Even if a family with disabled children does not have significant assets with which to fund a Special Needs Trust, parents can get life insurance policies that will fund the trust at their death. Then, if the parents are no longer present to provide care, the Trust will have been funded, and the Trustee will be able to use discretionary powers to administer to the financial needs of the Beneficiary. In this way loving parents can continue to provide for their children for years and even decades after they pass away. Further, if the family desires to preserve access to benefits such as Medicaid while providing supplemental income for needs, the estate plan can be modified to achieve this goal.
If you have a child with special needs in your family, please contact us at 719-687-2328 to set up a planning session where we will discuss how best to provide for their financial needs through a Special Needs Trust.
* This is not considered legal advice, and the legal system constantly changes. If you want current and accurate legal advice, please contact our office and arrange to speak with an attorney. 719-687-2328