What’s Your Plan? Part 2: Options for Planning
Editor’s Introduction: We’ve all heard the phrase, “Failing to plan is planning to fail”. Variations of this quote have been attributed to Benjamin Franklin, Winston Churchill and Alan Lakein, as well as others. With the New Year upon us, we often start to think of planning, setting goals and accomplishing new things. To start off our Parenting with Altitude blogs this year, we’ve asked several parents to tell us about their planning efforts in respect to financial planning and resources for their family. We’ll be publishing this series of blogs over the next several weeks with the hope that you’ll find some ideas and inspiration for planning for your family, specifically for your son or daughter with a disability or special health care need.
What’s Your Plan? Part 2: Options for Planning
Supporting a person with special needs can be a 24/7 job, and many caregivers lay awake at night worrying about what will happen to their son with Down syndrome or sister with Cerebral Palsy if they become unable to provide that support. Discussing your own vulnerability or mortality is never an enjoyable subject, but it is a necessary conversation for all families to have to ensure loved ones are protected and provided for in the future. This is never more crucial than with respect to a family member with special needs. Estate planning for families with special needs, also known as special needs planning, determines in advance how your loved one will be cared for without you (in addition to more typical issues such as the distribution of property).
Public benefit programs like Medicaid are often a lifeline for an individual with special needs, and a key factor determining whether that person can live a decent, fulfilling, and productive life. Thus, one of the most important aspects of special needs planning is maintaining public benefits eligibility. This is typically accomplished with a Special Needs Trust (SNT). A SNT is a legal document created for an individual with special needs in which a Trustee manages assets for the individual to ensure he or she can remain eligible for public benefits.
If you provide financially for your loved one with special needs or plan to leave a financial gift for him or her after your death, a SNT is an essential piece of your estate plan. The assets in a SNT do not count against the Medicaid/SSI resource cap because the individual with special needs does not have direct access to them. Only the SNT Trustee can access the assets, and he or she alone decides when to make distributions from the SNT. This allows assets to be set aside for supplemental expenses not covered by public benefit programs, such as education expenses, vacations, hobbies, or certain medical expenses.
There are several different types of SNTs. An individual first-party SNT, also called a self-settled SNT, is used when the individual with special needs has received or will receive substantial assets that would ordinarily disqualify him or her from public benefit programs, such as a person injury settlement. An individual third-party SNT is used when a third party wishes to provide for an individual with special needs, such as an inheritance from a family member. Finally, there are pooled trusts, in which a nonprofit organization sets up and administers a master SNT for multiple individuals with special needs, combining their assets and investing them together.
In some circumstances, families should also consider drafting a Letter of Intent spelling out the family’s wishes for the SNT funds. A Letter of Intent can also outline the individual’s functional abilities, routines, activities, and medical information. This document is essential if the individual with special needs cannot advocate for him or herself.
Every situation is different. A one-size-fits-all approach does not work for families with special needs, and therefore meeting with an estate planning attorney who understands special needs planning is an important first step in securing your family’s future. Probate Power, the Colorado Cross-Disability Coalition’s new estate planning legal program, focuses almost exclusively on special needs planning and can help address your family’s questions and concerns.
How are you planning for your son or daughter? You can share your ideas with us at: firstname.lastname@example.org
Be sure to visit The Resource Storeroom for more information on Financial Resources and Planning. Two other helpful resources include: The Arc Future Planning and Wright’s Law Future Planning We also love the resources at Lifecoursetools – these are great visual planning resources to use with your son or daughter to create “a good life” with financial planning included.
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