Planning your estate and providing for loved ones is a complicated task. When you must prepare for the future care of a special-needs beneficiary, estate planning can be even more complex than usual. It also becomes much more critical.
Planning your estate when someone with special needs depends on you requires careful attention to detail and the consideration of many factors others can ignore. There are several benefits many people with special needs qualify for that might be negatively affected by an inheritance. Further, some people with special needs cannot manage money and assets for themselves and are better served as the beneficiaries of a trust managed by someone else. It is also essential to do your best to extend the benefit provided by your estate for as long as possible.
Yes, it is more complex than usual, but you do not have to do it alone. A Cedar Park special needs estate planning attorney from Robbins Estate Law can help. Our firm understands the importance of creating an effective estate plan for special needs beneficiaries. When working with our firm, a special needs estate planning lawyer will personally work with you to create a plan that accomplishes all your most critical goals. Contact us today and schedule a consultation.
Importance of Estate Planning for Beneficiaries with Special Needs
Creating a well-crafted estate plan can give the guardians of those with special needs peace of mind and confidence that their loved one will be cared for after they pass. If you have a special-needs beneficiary, creating an estate plan that accounts explicitly for them is critical. A solid estate plan for special needs should account for beneficiaries’ financial, legal, and medical care.
Many individuals with physical or mental hurdles cannot manage the financial challenges of receiving a sudden inheritance. Therefore, an estate plan for beneficiaries who might struggle with an inheritance should appoint individuals and create legal structures to help manage the beneficiary’s money.
Further, public benefits are essential for many individuals with special needs. Many need these public benefits to obtain the assistance and care they need. Medicaid, Supplemental Nutrition Assistance, Social Security Disability Insurance, and Supplemental Security Income can help those with mental or physical challenges live happily. A sudden inheritance can make access to these programs more difficult or impossible. Estate planning for special needs beneficiaries should consider these programs as part of a comprehensive plan to care for their needs. Therefore, you need to create a plan that avoids risking the beneficiary’s eligibility for these programs.
Estate Planning Options
In Texas, several estate planning tools can be specifically tailored to care for a beneficiary with special needs for life. Support trusts, special needs trusts, and directives are three legal vehicles commonly used in special needs estate planning.
Support Trusts
Support trusts can be helpful in specific scenarios but are generally disfavored due to their limitations. Generally, support trusts are a legal vehicle in which a trustee manages the assets of a trust to support a child in obtaining food, shelter, education, medical care, clothing, and other basic needs. However, a child who is a beneficiary of a support trust will not qualify for Supplemental Security Income or Medicaid. This factor limits the usefulness of support trusts for special needs estate planning purposes.
Special Needs Trusts
Special needs trusts can effectively support a child or loved one with special needs into and through their adulthood. Individuals can set up these trusts to care for themselves or others with special needs while maintaining eligibility for programs such as Medicaid, Supplemental Security Income, and Supplemental Nutrition Assistance. Due to their effectiveness and flexibility, special needs trusts are the favored tool to care for beneficiaries with special needs through estate planning.
Directives
Suppose a person with special needs has the legal capacity to create directives. In that case, they can be a useful estate planning tool to ensure their future needs are met according to their preferences. Documents such as Powers of Attorney, Medical Powers of Attorney, and Advanced Medical Directives can help others care for individuals with special needs while considering their preferences. A special needs estate planning lawyer can use these tools under particular circumstances to enhance the care a special needs beneficiary will receive in the future.
Types of Special Needs Trusts
There are three primary types of special needs trusts that individuals can utilize when estate planning for a beneficiary with special needs: first-party trusts, third-party trusts, and pooled trusts.
First-Party Trust
The special needs person creates and funds a first-party trust to benefit themselves. People with special needs often create these trusts in situations where they recently inherited money or received a financial payout from a lawsuit. The sudden influx of funds complicates their ability to qualify for public benefits programs, so they transfer the money to a trust. Sudden changes are often challenging for people with special needs, so leaving it to a loved one to create their trust is not ideal.
Third-Party Trust
Third-party trusts are set up and funded by people who wish to provide for a loved one with special needs. Parents, siblings, and others create third-party trusts to help a person with special needs without affecting their eligibility for public benefits programs. Once the third parties provide assets to the trust, a trustee manages those assets to benefit the person with special needs. The trust can pay expenses that public benefits programs do not cover.
Pooled Trust
Pooled trusts allow individuals with special needs to pool their financial resources to obtain a mutual economic benefit. Usually, these trusts are created and managed by charities. The trusts give people with special needs access to a trustee who can better manage their financial assets.
Drawbacks of Special Needs Trusts
While special needs trusts are a valuable solution for individuals with special needs, several drawbacks exist. First, special needs trusts maintain ownership of any assets placed within them. Beneficiaries can only access funds through the trust. Second, trusts can be relatively expensive to create and manage. Management fees and other costs can add up over time.
Robbins Estate Law Can Help
At Robbins Estate Law, we know that caring for those with special needs is a tremendous responsibility. Our experienced team can work closely with you and your family to develop practical solutions to provide a high level of care for your loved ones. Contact us today!