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Special Needs Estate Planning: Basic Strategies and Tactics

Updated: May 17

estate planning for special needs
Special Needs Estate Planning: Strategies and Tactics

Families with children with disabilities need to take extra precautions in their estate planning.  This is true regardless of whether the child with special needs is a minor or is now an adult – especially if they will one day need to collect any public benefits like Medicaid or SSI.  The details will depend greatly upon the child’s competency and age, but it is never too soon to start considering how to plan for your loved one with a disability to enhance their life after your passing with special needs estate planning.

Prepare Advance Directives

If you have an adult child that has the capacity, it is important that they execute a medical and statutory durable power of attorney.  Having a medical power of attorney will allow the person to designate a representative to make medical decisions on their behalf should they become incapacitated. A statutory durable power of attorney, on the other hand, gives a representative the opportunity to manage their financial affairs.

Petition for Guardianship

For children who are about to turn 18 and lack capacity, it may be important to file an Application for Guardianship.  It allows parents to continue making medical, financial, and residential decisions for their child even after they turn 18.  Doing so also allows parents to select alternate guardians in case they pass away unexpectedly.

A First Party Special Needs Trust

For your disabled loved ones that are under the age of 65 and inherit directly, consider establishing a first-party supplemental (special) needs trust. This is funded with the assets of an individual who has a disability who has inherited money, received a settlement following a lawsuit, or has lump-sum disability benefits. The trust can be established by the individual or their guardian and, when properly drafted, will not impact their eligibility for government benefits.

Create a Third-Party Special Needs Trust

Establishing a third-party supplemental (special) needs trust allows family members to use their assets to fund a trust for the person with special needs and leave assets to the child with a disability. This type of trust does not contain a payback provision, allowing assets to transfer between beneficiaries by the creator of the trust. It also will not impact the ability to seek government benefits.

Plan for Medicaid

Medicaid is a public benefit that many individuals with disabilities benefit from, however, you must be careful when establishing an estate plan to not disqualify your loved one from receiving it. There is a 60-month lookback period when applying for long-term care, and any transfers made during those five years may result in a Medicaid penalty. One exception to this rule? Transfers to a special needs trust generally incur no penalty.

Special Needs Estate Planning Attorney

These planning tips require serious consideration and a lot of guidance. Your Legacy Legal Care has personal experience in planning for loved ones with disabilities and will ensure you and your family are properly taken care of to receive the care they deserve. Call us at (281) 885-8826 or contact us here to start planning for your loved one’s future today.

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