Estate planning for adult children with disabilities is a complex and important task. One estate planning strategy is to create a pay-back...
Estate planning for adult children with disabilities is a complex and important task. One estate planning strategy is to create a pay-back, supplemental, or special needs trust. This allows a child with disabilities to access the parents’ assets and still continue to receive government benefits. This helps to prevent the loss of Medicaid or Supplemental Security Income (SSI). The right advice and guidance from an experienced estate planning attorney can help ensure that the right plan is in place to continue to provide for the adult child.
Major Considerations for Successful Estate Planning
Estate planning for adult children requires careful consideration of the ways in which the individual might be impacted by the death of a parent, guardian, or primary caregiver. Important factors to consider for successful estate planning are:
- a child’s specific needs and abilities. It is important to specify the form and extent of his or her disability. The attending attorney will be able to offer alternatives to meet those needs
- his or her learning capabilities and the need for medical care
- the specific governmental benefits that the disabled child is eligible for, such as Medicaid and SSI
- the help and direction he/she may need after the parents’ death
- the conditions set for receiving the appropriate government aid and services for the adult child
What Does Medicaid Entail?
Medicaid helps the child with disabilities cater to his/her basic medical needs. These needs include hospital bills, doctor’s fees, medicine, therapies, and home-based services. Not all children with disabilities are eligible for this. If his or her assets are worth $2,000 or more, the individual may not qualify for aid. Even if the individual qualifies, this government aid may not comprehensively cover all medical needs. Creative estate planning strategies may be necessary to avoid this obstacle.
Understanding Supplemental Security Income
This program provides aid to people with disabilities who have little or no income and meager assets. SSI benefits help the child with disabilities meet financial needs. The benefits help with buying food, apparel, and paying for accommodations. Like Medicaid, eligibility is limited. If the individual has assets worth $2,000 or more, then he or she may not qualify for SSI benefits. However, setting up a supplemental trust may be an option to help avoid this issue.
What Is a Supplemental Trust?
Supplemental trust is a trust a parent creates to ensure his or her child receives financial support while maintaining eligibility for SSI and Medicaid. The trust is managed by a trustee who disburses the money the adult child is entitled to receive. Generally, parents incorporate the services of an estate planning attorney to help them create the trust. The lawyer will help draw the necessary documents including the letter of purpose. In this letter, the parents indicate all benefits intended to be in the supplemental trust. All insurance plans and properties that the parents designate go to this trust.
When setting up a supplemental trust, many attorneys also recommend naming co-trustees. This is generally a family member or close friend who is designated to manage the funds available as well as a banker or an attorney who manages investments. In most cases, the attorney will recommend creating a will and powers of attorney as well.
A second-to-die policy may also be helpful for parents of disabled adult children. This type of policy allows death benefits to be paid to the trust when the other parent or guardian passes away.
Protection of Assets
When estate planning for children with disabilities, parents must think about protecting personal assets and ensuring the disabled children can benefit from inheritance without cutting off government assistance. Enlisting professional legal counsel will help individuals to make the right decisions.
