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Special Needs Planning

Whether it's because of a physical or mental disability, you knew from day one that you needed to provide for them while you were alive and for them after you leave. What happens if you aren't there? If you have a child or a loved one who is disabled or otherwise not able to care for themselves, special planning must be done to ensure that they have competent, loving care and do not lose their government benefits.

One in ten families in the United States has a member of the family with a disability. The costs of medical care, special equipment and training can be overwhelming. With proper asset protection and special needs planning a trustee is able to use the trust funds to supplement the government assistance they receive. This will allow the disabled to benefit from various government programs, while the trust provides them with things the government does not.

Unfortunately, most parents fail to plan and sometimes a family is forced to spend all it has in taking care of a family member. Since there are strict asset ownership limits that must be adhered to, failure to plan may have the effect of disqualifying your child from government assistance. Sometimes parents leave their money to their other children, trusting that siblings will take care of the special needs child out of the funds they receive. However, all too often that never happens, or if it does, the child receives far less than they otherwise would.

At MLG we work to ensure that families employ and create a special needs plan to protect from the financial burden of providing long-term care for a member with special needs. By establishing a special needs trust, assets may be set aside for the care of the family member without placing the assets in that person's name. It gives the family control of the assets without disqualifying the beneficiary from receiving funding through government assistance programs.

Special Needs trusts can provide for example: Medical and Dental Expenses, eye examinations and glasses, transportation costs, clothing and other maintenance, education, insurance, therapy, and assistive devices and equipment. Special Needs Trusts must be established to provide maximum protection against unintended tax consequences and predatory practices by family members or dishonest trustees. These trusts can be funded with cash, stocks and securities and or personal property and real estate. They can be named as an owner or beneficiary of a life insurance policy. They are often used to protect personal injury settlements or judgments from jeopardizing government benefits but most importantly they provide peace of mind for family members that their loved one will be provided for. It is critically important that families seek out the services of attorneys who are knowledgeable and qualified in special needs planning. Your child is special. That means, that you need to be as a parent special, and that the planning and protection provided for the loved one is special too.

Special Needs Mistakes
Avoid making these eight mistakes in planning for your special needs child:

  1. Disinheriting the child
    You may have been advised to disinherit you disabled child to protect the child's SSI, Medicaid or other government benefits. These benefits rarely provide more than subsistence, and this "answer" does not allow you to help your child after you are gone or should you become incapacitated. If your child requires, or is likely to require, governmental assistance to meet basic needs, consider establishing a Special Needs Trust.

  2. Ignoring special needs when creating a trust for a child
    A trust that is not designed with your child's special needs in mind will probably render your child ineligible for essential benefits. The Special Needs Trust is designed to provide for the disabled person's comfort and happiness without sacrificing eligibility. Issues addressed can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (such as specially equipped vans) training and education, insurance, transportation, and essential dietary needs. The disabled person can also receive spending money, electronic equipment and appliances, computers, vacations, movies, payments for a companion and other self-esteem and quality-of-life enhancing expenses if the trust is sufficiently funded.

  3. Creating a generic Special Needs Trust
    Special Needs Trusts created by attorneys who have limited knowledge of the area can be unnecessarily inflexible and not customized to the particular child's needs thus the child fails to receive the benefits that the parents provided when they were alive. Also, "pay back" provisions are necessary in certain types of Special Needs Trusts, but detrimental in others. An attorney who knows the difference can save your family hundreds of thousands of dollars, or more.

  4. Procrastination
    None of us knows when we will die or if we will become incapacitated, so it is important to plan for your special needs child (or adult) early. This is particularly important because, unlike most other beneficiaries, your special needs child may never be able to compensate for your failure to plan. A minor beneficiary without special needs can work to meet essential needs as he or she reaches adulthood. You special needs child may not be able to do so.

  5. Not inviting contributions from others to contribute to the trust
    If you create the trust now, your extended family and friends can make gifts to the trust or remember the trust as they plan their own estates. You can also consider whether making the trust the beneficiary of a life insurance policy makes sense now while you are healthy and insurance rates are reasonable. In addition you can leave your own assets to the trust in your will and name the trust as a beneficiary of life insurance or retirement benefits.

  6. Choosing the wrong trustee
    When you and your spouse are no longer able to serve as trustee, you can choose who will serve according to the instructions that you have provided. You can also choose a team of advisors or a professional trustee. Whomever you choose, make sure they are financially savvy, well organized, and, most important of all, ethical.

  7. Relying on your other children to use their money to help the special needs child
    Relying on your other children to provide for your special needs child from their own inheritances can be a temporary solution for a brief time. If your other children have money to spare. However, this will not protect your child after you and your spouse have died or when siblings have their own expenses, financial priorities, or potential problems such as:
    1. If your child with the money gets divorced, his or her spouse may be entitled to half the money and is unlikely to use it to care for your special needs child.
    2. If your child with the money dies or becomes incapacitated while your special needs child is still living, his or her heirs might not care for your special needs child.
    3. If your child with the money loses a lawsuit or has other significant creditor problems, the court will require your child to turn that money over to the creditor.

Siblings of a special needs child often feel a great responsibility for that child and have felt this way all of their lives. When you provide clear instructions and a helpful structure, you lessen the burden on all your children and support a loving and involved relationship between them. Creating a Special Needs Trust protects all of your children.

8. Not protecting the special needs child from predators
An inheritance funded by Will rather than Revocable Living Trust goes into the public record. Predators are particularly attracted to vulnerable beneficiaries, such as the young and those with limited self-protection capabilities. Trusts let you decide who has access to the information about a child's inheritance, thereby protecting your child and other family members who may be serving as trustees from predators.

Charitable Planning
There are many options available when designing a strategy for those who wish to help others by making a charitable gift. For some who wish to maintain some control while benefitting others, a Charitable Remainder Trust (CRT) could be an attractive option. A CRT is generally funded with appreciated stock or real estate, and provides the grantor with a right to an income stream from the trust for a period of years or for the grantor's life. Upon the trust's termination, the assets in the trust are paid to the designated charity. Another charitable planning strategy is a Charitable Lead Trust (CLT). The CLT provides annual payments to a charity during the term of the trust, with the trust principal passing on to the grantor's children upon termination.

For those who wish to make substantial gifts to charity while retaining control over how the funds are distributed and used, a private foundation can be an option. Private foundations enable individuals to teach and or have family members, even younger ones, become educated and involved with philanthropic activities. At MLG we work with a number of publicly and privately supported charitable organizations. We can assist in the creation and structuring of a charitable trust and or foundation and we can administer private charitable foundations.

Our Services include:

  • Counseling on non-profit status
  • Advising on day to day operational and legal issues
  • Managing IRS related matters
  • The annual reporting and audits
  • Alignment of investment and operating strategies to comply with the charitable guidelines

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