Many people see a will as the core of their estate plan. However, if you have a child with special needs and want to plan for their future care, a will is often insufficient, on its own, to provide your child with financial support after your death. As a result, parents of children with special needs should engage in comprehensive estate planning that considers and accommodates their family’s unique circumstances.
Leaving Money Directly to a Child with Special Needs
Whether you are the parent or other relative of a child with special needs, you may want them to have the benefit of a monetary gift or inheritance after your death. A will allows you to leave certain bequests, or gifts of money or property, to anyone you choose, including your children.
However, if you have a child with special needs, leaving money directly to them could be problematic, in that it could disqualify them from certain means-tested government benefits programs. If placed in a bank account, any inheritance, regardless of size, would count against the low resource limits that apply to programs like Supplemental Security Income (SSI) and Medicaid. In that respect, an inheritance could thus potentially endanger the child’s eligibility for benefits.
Another issue that leaving a direct bequest of money to a child with special needs may cause is the child’s possible inability to handle money on their own. A will directs the distribution of money to heirs. It does not provide any safeguards for heirs who may be legally incapacitated.
Therefore, while you can use a will to leave money to a child with special needs, you may inadvertently create problems for them instead of benefiting them as you intended.
The Special Needs Trust
A better solution in many cases may be the special needs trust. A balance in the special needs trust does not affect eligibility for means-tested government benefit programs. A will can work in tandem with a special needs trust to protect eligibility for benefits. Rather than distributing the funds directly to the person with special needs, the will can direct the funds to a special needs trust. The funds in the trust are then exempt from being counted as a resource for means-tested government benefits programs.
All special needs trusts have trustees who administer the trust’s terms. A special needs trust is also useful in that it can specify the circumstances under which funds should be distributed to the child with special needs. Trustee oversight of the funds in the special needs trust can prevent the child with special needs from having to manage large sums of money. Trusts can provide detailed instructions to trustees regarding appropriate disbursements of trust funds.
Frequently Asked Questions
What is the role of a trustee in a special needs trust?
A trustee is the person or institution responsible for managing the assets in the trust. Their duties include following the instructions laid out in the trust document, making distributions that benefit the child with special needs, and ensuring that the trust remains compliant with government benefit rules. Trustees can be family members, professionals, or corporate entities, depending on what best suits the family’s situation.
Can other family members contribute to a special needs trust?
Yes. Parents, grandparents, and even friends can make gifts or bequests directly to the special needs trust rather than to the child. This mechanism ensures that contributions do not jeopardize the child’s eligibility for programs like SSI or Medicaid. Coordinating family contributions through the trust also provides consistency in how funds are managed and distributed.
How does estate planning for a child with special needs differ from traditional estate planning?
Traditional estate planning often focuses on distributing assets efficiently and minimizing taxes. Estate planning for a child with special needs, however, must also account for long-term care, government benefit eligibility, and the child’s ability to manage money. This type of estate planning requires specialized tools—like special needs trusts—and careful coordination to ensure financial support is provided without unintended consequences.
Contact Us Today to Learn More About Our Legal Services
Rubin Law is the only Illinois law firm to dedicate itself exclusively to providing compassionate legal services for children and adults with special needs. We offer unique legal and future planning techniques to meet your family’s individual needs.
Call us today at 866-TO-RUBIN or email us at email@rubinlaw.com to learn more about the services we can offer you and your family.