Article: Planning for a Special Needs Child

Shelley A. Elder, Esq.
Elder Law Firm, PLLC
Kennesaw, Georgia 30152
404-783-2244

Member of the national ElderCare Matters Alliance, Georgia chapter

There are few things more stressful and worrisome than treating and supporting a special needs child. Parents must spend, save, and plan for their own retirement while considering the impact that their decisions may have on their special needs child and any other children they may have. They also think about what will happen to that child when they are no longer able to care for them.

What are some options that a family may have? Each family’s situation is different, but a special needs trust may be the answer, especially for those individuals who may be or become eligible for public benefits, including Supplemental Security Income (SSI) and Medicaid. These programs help pay for basic health and living expenses.

Medicaid was created by Congress in 1965 as Title XIX of the Social Security Act, which provides broad guidelines to the states, who have some discretion when determining eligibility. In Georgia, for example, an individual may receive nursing home benefits under Medicaid when he/she has no more than $2,000 in assets in his/her own name and an income of not more than $2022 per month. Therefore, it is imperative for parents not to name their special needs child a beneficiary of any assets that would put him/her over that figure. Proceeds from the parents’ life insurance, 401(k) and 403(b) accounts, real estate, annuities, and many other assets may be placed in a special needs trust. And, not only parents or legal guardians can set up these trusts – grandparents and third parties may do so as well.

The trust becomes the named beneficiary of those assets, and the document instructs the trustee how to manage, accumulate, and disburse money for the benefit of the child to enhance his/her life. If the special needs trust is set up properly, in most cases, it will not affect the government benefits that the child receives.

Consider this family – Michael and Janice Clark are married and have two children – Emma, age 9, and Noah age 5. They own a home valued at $200,000, but don’t have any equity, two vehicles valued at $18,000, and a $150,000 life insurance policy on each of them. The combined gross income for the couple is $90,000. Both Michael and Janice have 401k plans through their jobs, and own stocks/bonds worth $40,000. The couple was shocked to learn recently that little Noah is autistic. This couple doesn’t have much and isn’t considered to be “rich,” so do they need estate planning vehicles such as a special needs trust? Absolutely – consequences can be even more tragic when a family doesn’t have many assets and fails to plan.

Using our example, let’s say the children grow up, but Noah continues to need specialized care. Eventually both parents die, but they had set in place the special needs trust for Noah, who now qualifies for SSI and Medicaid. Because his inheritance went to the trust, he did not lose his government benefits. In addition, essential expenses such as clothing, vocational training, facilitative technologies, and travel expenses for occupational or speech therapy or even pleasure may be provided. Rules and restrictions vary by state so parents/guardians should check with a qualified attorney in their state.

A special needs trust works best when integrated into the complete estate plan. It is best if a will directs which funds will go into the special needs trust. A “stand alone” trust can be created during the parents’ lives and can be funded by the provisions in the will, along with other assets that can be contributed by others, such as grandparents.

Parents need to also consider appointing a guardian for their special needs child to manage his/her day-to-day care in the event that they cannot do so. The guardian may be the same person chosen to be trustee, but parents should also consider including as many loving people as possible in the care of their loved one.

Finally, parents may want to consider preparing a letter of intent that describes their wishes for their child. A letter is not a legal document, but can be very helpful to the trustee or surviving family so that they are able to keep the child’s care as close to what the parents want/expect it to be. While these documents do not have to followed by the legal guardian, usually that person cares about their ward and will do their best to follow those wishes.

Planning for the needs of a special needs child can be a complex process. For a family facing this situation, it is best for them to locate an attorney who specializes in special needs issues and can work well with a financial and/or tax advisor to assist them.