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Special Needs Require Special Planning

If you’re a
parent who has taken the time and energy to create a Revocable Living
Trust ("RLT") or Will, you should be commended for your initiative and
perseverance for ensuring your children and grandchildren are properly
cared for when you are gone. If you have not yet created an estate
plan, doing so could be one of the most important actions you can take
on behalf of your children’s future well being. A properly drafted
estate plan designates who will care for your minor children upon your
death, as well as providing for the smooth transfer of wealth to your
children. Many parents assume that making sure a child is financially
secure after they are gone means leaving the assets outright to the
children. For many reasons, such as a child’s inability to manage
finances, outright distribution of your assets to your children may not
be the most prudent option. This becomes especially true if any of the
beneficiaries of your trust estate have, or develop in the future,
special needs and require the assistance of government aid.

are generally two types of government assistance: Employment-based
assistance and need -based assistance. Employment-based assistance is
those benefits available to an applicant based upon the work history of
the applicant or a close relative. Within this category you would find
Social Security and Medicare. In contrast, need-based assistance is
offered, generally, to lower-income applicants only. Need-based
assistance, such as Supplemental Security Income, or "SSI", and
Medicaid, has stringent income and resource requirements for receiving
financial assistance. Leaving assets outright to a special needs child
could render them ineligible to receive otherwise valuable government
assistance until those assets are exhausted. But what is a parent to do
to avoid this result?

One option is to disinherit the special
needs child completely, thereby allowing the child to receive aid from
the government they would otherwise not be able to receive with an
inheritance. Although the parents could instruct their other children
to care for the special needs child, there is no guarantee that this
will be done. Additionally, there is no assurance that the government
program will continue in existence or will provide the expected level
of assistance. Finally, and possibly most significantly, the
psychological effects of disinheriting the child could be devastating
to the child and the parents during their lifetimes. Therefore, for
most parents this option is not an option at all.

A second and
more viable option for fulfilling a parent’s desire to care for a
special needs child without interfering with his or her ability to
receive government assistance is through the use of a properly drafted
RLT or Trust inside your Will. Special provisions can be included in your RLT or Will limiting the
child’s access to the trust assets and, hence, the inheritance’s
effects upon assistance eligibility.

As any mandatory
distributions from an RLT or Testamentary Trust will be taken into consideration in
determining a child’s eligibility for government assistance, the
Trustee of your trust should instead be given full discretion to
distribute income and/or principal for the benefit of a special needs
beneficiary. In this manner, only those assets actually distributed are
counted towards qualification. If the trustee does decide to distribute
trust assets for the benefit of a special needs child, it is important
that the trust document limit such distributions to only supplemental
purposes. Distributions for the support of the child, such as for food and shelter or routine medical care, will be considered when
determining the child’s eligibility for aid. Therefore, distributions
for the beneficiary’s support should be prohibited. It is important to
state clearly your intention that distributions supplement, but not
diminish, any form of government or private support that a beneficiary
is then receiving or becomes eligible to receive. Although this may
seem to limit distributions drastically, your child still may receive
trust assets for his or her comfort and general welfare.

planning is a highly specialized area of the law. The rules and
requirements vary from state to state and failing to be aware of your
state’s law can severely hinder your child’s chances of receiving
government assistance. Some states have introduced legislation allowing
trust assets to be accessed where certain needs of a beneficiary are
not being met, unless the trust clearly states that the statute is
inapplicable. Therefore, it is imperative that you consult with a
qualified estate planning and elder law attorney to discuss your particular needs and
to incorporate any unique provisions into your trust required by your
state. Failing to include special needs provisions in your RLT, or
failing to have them drafted by a knowledgeable estate planning
attorney active in benefits planning, could result in the loss of
valuable government assistance for your special needs beneficiary.

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