Do you contribute financial resources for the care of a child, parent, friend or other loved one with special needs? Have you thought about how that care will continue after you pass away? If not, then you are definitely not alone.
Many people, regardless of whether they are or aren’t providing financial support to vulnerable loved ones, procrastinate on the issue of estate planning. Some people don’t think they have enough assets to worry about having an estate plan prepared, some just assume their spouse or child will inherit automatically, and others feel naming a beneficiary for life insurance policies and accounts will offer sufficient financial stability for their heirs.
That being said, putting off the discussion doesn’t lessen the urgency or dampen the need for a comprehensive estate plan, particularly if you want to ensure a special needs dependent relying on you for financial support is taken care of after you are gone.
Special Needs Planning Options
There are several different options for providing financially for a special needs loved one, each with their own benefits and consequences.
Simply passing along assets to loved ones is an option. It is relatively simple, and doesn’t necessarily even require any estate planning. It definitely comes with risks, though, including exposing your entire estate to creditors. It can also jeopardize Medicare or Supplemental Security Income (SSI) payments that may be covering the high costs of around-the-clock care for your special needs loved one because of this little-known fact: Having more than $2,000 in total personal assets can result in the loss of Medicare or SSI benefits.
Putting money into a trust for the benefit of a vulnerable loved one is a much better estate planning option. Trusts controlled by a family member or organization (many banks have trust administration departments) require time and effort to establish, and some effort to maintain, but they are stable, definitive sources of income for your special needs dependents and will ensure quality care is provided for years to come.
More About Trusts
Various trust options exist, but only you and your estate planner (or financial analyst) can decide which is the best fit for your unique financial situation and goals. For instance, some families might be best served by a testamentary or third-party trust that remains largely unfunded during the grantor’s (the person who will be funding the trust) lifetime, and has funds flow through to it once the grantor has died. Other families might be better served by a first-party special needs trust that is funded by assets belonging to the beneficiary him or herself, commonly due to a lawsuit or a generous gift.
Whatever estate planning option you decide upon, it is vitally important you carefully consider the pros and cons of each possible method of funding the care of your special needs loved one. For more information about these and other estate planning issues, visit an experienced estate planning attorney in your area.