Planning for Individuals with Special Needs

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Estate planning for a client who intends to benefit an individual with a disability or special needs requires looking to the future as to the needs this individual will have, particularly as he or she ages, which is not an easy task.  There are any number of issues that have to be considered, such as what is the individual’s long-term prognosis and what level of care is anticipated in order to meet that individual’s needs? Or what kinds of medical breakthroughs may occur that could alter the individual’s need for supports, help, or maintenance?  Or what government programs might the individual be eligible to receive over time?  Or what is the likelihood that these programs will still be in place for the individual to use in the future?  Additional questions then include how do all of these variables impact the client’s own estate planning for the individual over time?  Or how does the client’s plan continue to evolve over time to be able to take into account changes to the individual’s needs and/or the type(s) of government benefits available?

It is a daunting proposition for a client who desires to set up the best possible plan for their disabled beneficiary, whether it is a child, grandchild, more distant relative, or even a friend.  Ideally, the disabled individual is able to express their needs and wants and the manner in which he or she would want those needs met.  Unfortunately, the individual’s disability may limit his or her ability to participate in and/or to help direct the manner in which their needs are met.  In this planning area, one has to always start with to what degree can the disabled individual manage his or her own needs, care, or support?  And then address other matters which could impact on the planning such as will the disabled individual be able to work?  Or where does the disabled individual reside?  Does the disabled individual’s family have sufficient resources to be able to separately meet the individual’s needs?  How can the client’s planning coordinate with planning that others (for example, other family members) may have put in place for the disabled individual?

The key hallmark of any good estate plan that may involve planning for a disabled individual is understanding that there is a need to regularly review the planning put in place for the disabled individual, to better ensure it meets that individual’s current needs.  Any plan for a disabled individual will in all likelihood need to be tweaked in the future in order to deal with unforeseen changes in that individual’s needs, abilities, desires, or, more critically, changes in government assistance programs, which may be integral to meeting the disabled individual’s ongoing living and/or care needs.

If the disabled individual will likely be receiving government benefits, such as Supplemental Security Income (SSI) and/or Medicaid, the creation of a “supplemental” or “special” needs trust to then hold or receive the assets intended to benefit the individual is the recommended manner in which to plan.  This type of a trust can then be used to pay for the disabled individual’s supplemental needs, which will not otherwise be paid for or through any government benefit program.  A special needs trust must be drafted to ensure the disabled individual does not lose financial eligibility for any government benefits he or she is receiving.  In the event it is not possible to predict whether an individual will be eligible for government benefits in the future, the client’s estate plan can give power to a trustee to establish a special needs trust at the time of the client’s death for the disabled beneficiary. Whether or not a trust for the benefit of a disabled individual is funded now or left empty until the death of the planning client, money can flow into the disabled individual’s trust from any number of sources, including the planning client’s estate, the planning client’s own revocable trust, or via a previously issued life insurance policy which insured the planning client’s life.

Unfortunately, some individuals choose not to create a trust for a disabled individual at all and simply opt to disinherit him or her entirely, believing there is no legal way to provide for the disabled individual without causing a loss of government benefits.  Or, alternatively, these individuals simply choose to have government benefits be the sole support system for the disabled individual.  The absence of a comprehensive plan to meet the needs of a disabled individual can have lasting negative impacts on that individual’s financial and emotional well-being. Establishing a plan that is designed to meet the needs of a disabled individual over the course of his or her lifetime will help ensure that individual is taken care of financially and medically and in the manner that the planning client wishes.