Estate Planning for a Loved One with Special Needs

Estate planning can be paradoxical. On one hand, it’s all about you. It’s about what you want for the future, and you can be completely rigid with your decisions. Ultimately, however, estate planning is about taking care of those you love, even after you are gone.

Nowhere is this more apparent than when you have a loved one with special needs. Regardless of their level of independence, they will require some form of lifelong care. You may have been primarily responsible for this care, but one day you will be gone, and someone else must take on the challenge.

With a proper estate plan, you can do far more than just pass along your possessions to your beneficiaries. You can also construct a plan that will continue their care. In this article, we will explore several necessary aspects of estate planning when you are caring for someone with special needs.

Appointing Guardians

Your loved one may not be able to properly care for themselves independently. When this is the case, you must appoint guardians who can watch over them and help manage their lives.

Guardianship is a serious responsibility. Essentially, it takes away most of the ward’s rights and hands them to another person. (The ward is the person under the guardian’s care. In this case, the ward is your loved one with special needs.)

Guardians can have varying levels of authority over the ward, but in the most extreme cases, they essentially run the ward’s life. The ward has little authority over their own money, health, and so on. A guardian could potentially block a ward’s marriage or even their ability to have children.

When viewed through this lens, guardianship is not something you want to pass off to a stranger. Most guardians are good people with the best intentions, but the wrong person can easily take advantage of the system.

In your estate plan, you should name both a short- and long-term guardian for your disabled loved one. The short-term guardian should be able to take over immediately. They are there to handle the immediate, urgent needs presented. Their inclusion also gives the long-term guardian time to prepare.

The long-term guardian will certainly need this time. They are about to embark on a lifelong journey, being the primary caregiver of a disabled person. There are a ton of decisions to make for their ward. They must worry about the ward’s living situation, finances, healthcare (both in terms of treatment and maintenance), and so much more.

Within your plan, you can make detailed plans for your loved one’s care. For instance, you can build in activities. Say you had a tradition where you took your loved one out every Wednesday for ice cream. You can continue this activity, specifying that the guardian should do this, too. Your plan can even financially incentivize a guardian, paying them for these activities as a service.

Creating a Special Needs Trust

A trust and a will are separate things. A will allows you to transfer your property all at once after the assets have moved through the courts. A trust is a living financial entity. It can continue to grow long after its grantor dies. The grantor is the person who establishes the trust and adds their assets to it.

If you are leaving a special needs loved one behind, you probably can’t give them their inheritance all at once. They may not have the necessary skills to manage the estate. This is one of the main reasons why they might need a guardian to help.

Your loved one does, however, need money for their survival. This is where the trust comes in. It can fund their food, medical treatment, living expenses, and so on. It can pay someone to be their full-time guardian if necessary.

A trust is managed by a trustee. This person manages the money, overseeing expenses, withdrawals, and so forth. If the trust is large enough, the trustee can make investments for the trust, allowing it to grow, helping keep your loved one safe and comfortable.

The guardian and trustee can be the same person. This may not, however, be the best scenario. Depending on the level of care your loved one needs, the guardian may not be able to manage both the health and finances of their ward.

If you must appoint a separate trustee, put as much care and effort into this decision as you do when appointing the guardian. This person will have the authority to limit or cut off the recipient, so you need someone you can trust. Also, be certain to make a plan for your trustee’s successors. You can list a few backup people as well, or you can give the trustee the authority to appoint someone once they are no longer able to continue the work.

Trusts Designed for Special Needs Beneficiaries

First-Party Special Needs Trusts

These trusts are designed specifically to benefit someone with special needs. This person is the only one who can use and benefit from the trust. Essentially, they are both the grantor and the beneficiary. Their assets can go into the trust along with any inheritance they receive. In your estate plan, you can will this person’s inheritance directly into the trust.

One particular benefit of this trust is that it does not affect the beneficiary’s SSI benefits. They can still receive any deserved disability benefits while also using money from the trust.

Once the beneficiary dies, the trust is used to pay back any debts or costs of government benefits.

Third-Party Special Needs Trusts

These trusts act much like a first-party trust, only they don’t directly belong to the beneficiary. The grantor is someone who wants to help the person with special needs. The trust normally belongs to family members caring for the beneficiary. It also doesn’t affect the beneficiary’s ability to receive SSI benefits.

A third-party special needs trust does not contain the payback requirements of a first-party trust. When the beneficiary passes on, the assets within the trust can be used however the grantor sees fit. They can pass the assets along to other family members, revert them to themselves, give them away to charity, etc.

Pooled Special Needs Trusts

This trust is managed by a charity. Many individuals can contribute to it, and the benefits go directly to the person with special needs. This option may be helpful for people who don’t have one contributor to help them, but they do have large families of people who can all chip in a little. A pooled trust can be either first- or third-party.

Our firm is here to help with all your estate planning needs. If you have a loved one with special needs, schedule time with us to help secure their future. Our number is (210) 960-9996, and you can contact us online.

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