While most parents are focused on the daily needs of their children, many of

 them have not taken a long-term view of their children’s financial future. 

 Parents of children with special needs must take steps to ensure that

 financial and medical decisions will continue to be made in the children’s

 best interest into their adulthood.  Moreover, since individuals are living

 longer, a plan must be created so that when parents can no longer care for

 their children, the responsibility for providing continued care does not

 unexpectedly or by default fall upon siblings, other family members or the

 community.  Every plan for a child with special needs should include a:

1)      Letter of Intent

2)      Plan of Care

3)      Special Needs Trust


The Letter of Intent describes your goals and expectations for your child’s

 future, and contains such concerns as your child’s medical condition,

 guardianship needs, ability  to work, desired living arrangements, available

 transportation, education and employment costs, recreational programs,

 financial needs and who the caretakers might be.


The Plan of Care describes your child’s current medical condition and

 prognosis for the future, current healthcare providers, therapy, prescription

 drugs, special medical equipment and personal grooming needs.


A Special Needs Trust (SNT) allows an individual with special needs to shield

 assets for certain purposes while continuing to maintain eligibility to receive

 Supplemental Security Income (SSI), Medicaid and other follow-along

 benefits.  The trust is not just another “boiler-plate” agreement that will

 magically address all issues that might impact your child and the operation

 of the trust.  The following is just a sample of some of the issues that should

 be considered when crafting the language for a special needs trust:


1.       How much funding is enough?  Income and expenses must be

 projected based on your child’s life expectancy, while also

 incorporating assumptions for an inflation rate, investment returns and

 income tax rates.  You may also want to consider the financial needs of

 your child’s guardian/caretaker.


2.       If parents become divorced, you must consider the impact child

 support payments may have on the child’s eligibility for SSI.


3.       If your child is eligible for a structured settlement due to an injury or

 medical malpractice, it must be structured in such a way that the child

 will continue to be eligible for government benefits.  Your personal

 injury attorney may not have the expertise to structure a settlement in

 way that best serves your child.    


4.       For many parents, the majority of their savings is held in some kind

 of retirement account, typically an Individual Retirement Account

 (IRA).  For income tax purposes, it is usually best to stretch distributions

 from an IRA out over as long a period as possible.  If an IRA account

 names a “designated beneficiary”, the designated beneficiary’s age

 determines the amount of the distribution.  If there is no designated

 beneficiary, the account must be paid out in full within five years after

 the account owner has passed away.  A poorly drafted SNT may not

 qualify as a designated beneficiary under IRS rules.


5.       Choosing a trustee is important because the trustee must have the

 necessary expertise to manage the trust, make proper investments, pay

 expenses, prepare tax returns and defend the trust from claims against

 trust property.  Moreover, the trustee must understand how each

 distribution made from the trust will affect the beneficiary’s eligibility

 for government benefits and programs.  Very few people have this

 experience, yet some people are also uncomfortable with a non-family

 member managing a loved one’s trust.  In this situation, several

 alternatives  are viable:

a)      appoint a family member, who will then hire desired

 professionals to provide necessary assistance

b)      appoint a family member and another advisor to serve as co-


c)       designate a trust protector, who has the ability to review trust

 activity and defend the trust


6.       What expenses can’t a SNT pay for?  SNTs are designed to

 supplement and not replace the basic support provided by government

 programs like Medicaid and SSI.  So items related to food and shelter

 should not be paid through a SNT without consulting an advisor.


7.       Planning or lack thereof by other relatives can have dire

 consequences for your child.  I don’t know of too many parents who

 share the contents of their Last Will with their children.  In most

 situations, the Wills were drafted a while ago and, in general, they

 probably leave their entire estate to their children and/or

 grandchildren.  If a grandchild is receiving government benefits and as a

 result of the death of a grandparent or other relative the child receives

 an inheritance, the likely result is that the child will be ineligible to

 continue to receive such benefits.  Please speak with your relatives and

 inform them that if they desire to leave a portion of their estate to your

 child, they must amend their Will or trust document to reflect that such

 portion be directed to your child’s SNT.


8.       A SNT may either be created upon the parent’s death or during their

 lifetime.  If you are aware that extended family members and friends

 are interested in making gifts or leaving bequests to the SNT, then the

 SNT should be created at this time.  So please invite people you know

 to contribute to the trust!


Advance planning by parents and families can make a significant difference

 in the life of a child with special needs.  Please communicate your plans with

 your extended family members and friends.  Do it today!



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