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Who Can Benefit from a Special Needs Plan: Crafting a Comprehensive Plan for the Future

Posted On: January 30, 2024

By: Todd Villarrubia

Todd M. Villarrubia, an authority in wealth planning and preservation, brings over 30 years of in-depth, experience to the complex challenges of safeguarding familial and individual wealth. Based in New Orleans, Louisiana, his expertise is not only recognized in the local community but also reverberates within the legal industry.
Jefferson Parish Louisiana Fundamental Estate Planning
Whether you’re a parent with a special needs child or an adult caring for an elderly or special needs loved one, understanding the benefits of a comprehensive Special Needs Plan is crucial. Careful planning ensures that the individual with special needs has clear financial security upon your death, as well as specific goals to address the needs of your child or loved one so that they can be successful in the future. From guardianship and living arrangements to managing finances and planning for adulthood, each element of a special needs plan plays a crucial role in ensuring a secure and…

Whether you're a parent with a special needs child or an adult caring for an elderly or special needs loved one, understanding the benefits of a comprehensive Special Needs Plan is crucial. Careful planning ensures that the individual with special needs has clear financial security upon your death, as well as specific goals to address the needs of your child or loved one so that they can be successful in the future. From guardianship and living arrangements to managing finances and planning for adulthood, each element of a special needs plan plays a crucial role in ensuring a secure and fulfilling future for your loved one with special needs. Working closely with an attorney experienced in special needs ensures that you will tailor a plan that meets the unique needs of your disabled loved one without jeopardizing their public benefits.

Protecting the Future of a Loved One with Disabilities

Creating a comprehensive Special Needs Plan is more than just legal preparation; it's about understanding and preparing for the various aspects of your loved one's life. Before planning for a disabled child, it's essential to consider both their medical and supplemental needs, explains Special Needs Answers' article: "What To Know Before Beginning Special Needs Planning." Leaving money directly to a child receiving means-tested government benefits, like Social Security Supplemental Income (SSI) or Medicaid, could make them ineligible for these programs.

In most states, beneficiaries of either program are only allowed to have a few thousand dollars in assets, with the specific amount varying by state. However, the financial support from government programs only goes so far. Many families opt to have their own family members with special needs live at home, since the benefit amount is rarely enough.

What Is a Special Needs Trust?

At its core, a Special Needs Trust (SNT) is a vessel of hope and security. This trust is not just a legal document; it's a lifeline, a bridge to a better quality of life for the special needs loved one or child who faces unique challenges. The key is that the SNT owns the assets, not the disabled individual or child who is the trust beneficiary. A SNT protects the individual's assets and money by preserving eligibility for essential government benefit programs. An SNT navigates the stringent income and asset limits of government benefit programs, while still providing additional life-enhancing needs.

SNTs are managed by a trustee who will make financial distributions from the trust to the loved one with special needs. The funds in the trust can be used to pay for additional medical care or enhance quality of life, such as a cell phone, a vacation, or a private room in a group living facility. The SNT ensures that a vulnerable family member receives the money and other relatives, such as a sibling, don’t have a financial burden.

Third Party Special Needs Trusts (SNTs)

Third Party SNTs are established by someone other than the beneficiary, typically a parent or relative, to benefit an individual with special needs. The key advantage of Third Party SNTs is that there's no limit on the number of assets they can hold. Notably, upon the beneficiary's death, the remaining funds in the trust do not have to be used to reimburse the government for benefits received during the beneficiary’s lifetime. Instead, these assets can be distributed to other beneficiaries as specified in the trust. This type of SNT is a popular choice in planning for a family member with a disability and their long-term care, as it allows for greater flexibility and control over the assets and their eventual distribution.

First Party Special Needs Trusts (SNTs)

In contrast, First Party SNTs are created using the assets of the special needs individual themselves. This type of trust is often used when an individual with existing assets becomes disabled and wishes to qualify for government benefits. They can transfer their assets into a First Party SNT in these cases. A critical rule for First Party SNTs is to include a provision to reimburse the government for benefits paid on behalf of the beneficiary after their death. This reimbursement requirement is a trade-off for allowing individuals to retain their assets in the trust while qualifying for government benefits. First Party SNTs must also be established before the beneficiary turns 65. This type of SNT is particularly relevant for individuals who acquire a disability later in life and have accumulated assets that they need to protect, while also accessing government benefits. Because each state has different requirements, families must work with a knowledgeable estate planning attorney to create a Special Needs Trust.

How Do You Choose a Special Needs Trustee?

The SNT will name and provide comprehensive instructions for the trustee who will manage assets in the trust on behalf of the beneficiary. Deciding who should manage the trust's finances is crucial. While a family member may have emotional ties, a professional fiduciary can offer objective, skilled financial management. This is particularly important in complex situations, such as when the beneficiary has drug dependency or lacks a strong family network. It's also prudent to name several trustees to ensure continuity.

Who Can Benefit from a Special Needs Plan?

1. Individuals with Permanent Disabilities

Those with conditions like cerebral palsy, chronic mental illness, or severe developmental disabilities often require ongoing support. An SNT for these individuals is like a lighthouse, guiding the way through the fog of financial and care-related challenges.

2. Those with an Uncertain Future

Disabilities aren't always static. Advances in medicine and technology can shift the landscape. A SNT acts as a flexible safety net for those with uncertain future needs, adapting to whatever the future holds.

3. Future SSI or Medicaid Candidates

Some individuals may not currently need SSI or Medicaid but could in the future due to progressive conditions. A SNT is a forward-thinking vessel charting a course for future stability.

4. Recipients of Medicare or SSDI

Those on Medicare or SSDI may find these benefits insufficient over time. An SNT can supplement these programs, filling gaps to ensure comprehensive care and support.

5. Individuals Unable to Manage Finances

For those who struggle with financial management due to conditions like mild autism or bipolar syndrome, an SNT is a protective barrier, safeguarding them from financial missteps and exploitation.

What Else Should Be Included in a Special Needs Plan?

Creating a comprehensive Special Needs Plan is more than just legal preparation; it's about understanding and preparing for the various aspects of your loved one's life. Additional planning considerations include creating a life care plan for the adulthood of a child with disabilities, additional financial considerations and ways to support decision-making, whether that is through guardianship or another less invasive strategy.

Writing a Letter of Intent

A letter of intent is a comprehensive document about a loved one or a child with special needs that parents or guardians write to detail all elements about the individual's life, medical and disability conditions, preferences, personality and more. A letter of intent creates a smoother transition from the guidance of a parent or family member to a new caregiver or guardian when needed.

Start by Crafting a Personal Biography

Begin by writing a detailed biography of your loved one with special needs. This should include basic information like their name, birth date, age, likes, dislikes, favorite activities and relationships with family and friends. This biography serves as a guide, offering a deep understanding of your loved one to anyone who might be involved in their care in the future.

Envisioning Future Scenarios

Next, envision their future in three scenarios: a good future where you are present to care for them, a not-so-great future where they are well, but you're not around and a bad future. Being specific in these scenarios helps identify potential pitfalls and aids in planning effectively.

Selecting a Guardian or Decision-Maker

First, it's pertinent to examine the nature of your loved one's disability and whether they will need the care of a guardian or simply need help making financial and life decisions. Speak with a special needs attorney to decide if other estate planning documents, like a power of attorney, might provide the necessary oversight for the individual when they can no longer function independently. Determining who will become your loved one's guardian or future caregiver is critical. List potential guardians in order of preference, understanding that the first choice may not always be available. It's essential to have conversations with these individuals to ensure that they are willing and able to take on this responsibility.

Living Arrangements: Finding the Right Fit

Living arrangements are another significant aspect of a Special Needs Plan. Assess whether your loved one can live independently, must be close to a guardian, or requires a group care facility. Each option should be evaluated based on their specific needs and abilities. In addition, a financial plan will be required to plan for long-term or facility-based care costs, if needed.

Preparing for Employment and Adult Life

Transitioning Beyond High School

As your child with disabilities approaches adulthood, consider their life post-high school. A comprehensive special needs plan will consider questions like: What educational or vocational training will they need? How can they be supported in finding meaningful employment?

Developing a Plan for Adult Success

Start planning early to help your loved one develop the skills and support network they need for a successful adult life. This might include job coaching, life skills training, or exploring supportive employment opportunities.

Conclusion

Creating an effective Special Needs Plan is not a one-size-fits-all process. It requires a nuanced understanding of your loved one's current and future needs. Early planning is critical, especially for children with disabilities who are still school-aged and benefiting from educational-based support and care but will eventually need a transition plan for adulthood.

If you're navigating the complexities of caring for a loved one with special needs, consider the profound impact a Special Needs Plan could have. Consult with an estate planning attorney with experience in special needs planning to explore how to craft a plan that will meet the unique needs of your loved one.

Key Takeaways: Crafting a Comprehensive Special Needs Plan

  • Understanding Special Needs Trusts (SNTs):
    • SNTs are designed to hold assets for individuals receiving government benefits without affecting their eligibility.
    • They provide benefits like creditor protection and are managed by a trustee.
  • Types of Special Needs Trusts:
    • Third Party SNTs: Created by someone other than the beneficiary, with no asset limit and no requirement to reimburse the government after the beneficiary's death.
    • First Party SNTs: Established with the beneficiary's own assets, must include a reimbursement provision to the government and must be formed before the beneficiary turns 65.
  • Letter of Intent:
    • Write a letter for the future caregiver or guardian with a detailed biography of the loved one with special needs to guide future caregivers and trustees.
    • Envision future scenarios (good, not-so-great, bad) to prepare for different possibilities.
  • Guardianship Considerations:
    • Choose a guardian carefully, with backups in place, and ensure that they are willing and able to take on the responsibility.
  • Trustee Selection:
    • Decide between a family member or a professional fiduciary as the trustee, considering the complexity of the estate and the beneficiary's needs.
    • Ensure that the trustee is responsible, well-organized and skilled in managing money.
  • Preparing for Adulthood:
    • Plan the transition beyond high school, focusing on vocational training, employment opportunities and life skills development.
    • Assess the best living arrangement for the loved one, considering options like independent living, living near a guardian, or in a group care facility.
  • Comprehensive Approach:
    • A Special Needs Plan should be comprehensive, covering legal, financial and personal care aspects.
    • Work closely with an experienced estate planning attorney to tailor the plan to the unique needs of the loved one.
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