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Special Needs Planning Mistakes
1. Disinheriting the child.
When a special needs child is disinherited, that child will need to depend on government benefits such as Medicaid and Supplemental Security Income (SSI). While these programs can be greatly beneficial, it is not wise to rely solely on them to provide security. Instead, establish a special needs trust (SNT) which will not preclude a child from government benefits, but will provide protection in the event that government benefits are reduced or insufficient.
2. Creating a generic special needs trust.
Parents of special needs children are accustomed to providing a level of care for their child beyond that which is specified in a generic special needs trust. However, working with an attorney familiar with this area of the law can allow parents to establish a SNT that provides for the particular needs of their child.
3. Failing to prepare a letter of intent.
In addition to a well established trust, the trustee of the SNT should be provided with a letter of intent conveying important information about the specific health needs, daily activities, and preferences of the child with special needs. This letter can prove to be an important document in assisting the child’s new caregiver in aiding the special needs child.
4. Choosing the wrong trustee.
There is no more important decision when establishing a SNT than choosing the person who will manage the trust for the special needs child when the parent is no longer living. The trustee must be competent, financially responsible, and ethical.
5. Failing to properly fund the trust.
Providing for a special needs child often requires a plan that allows for liquidity when needed. A great way to ensure funding for the child when necessary is to establish a permanent life insurance policy naming the SNT as the beneficiary.
6. Failing to invite contributions from friends and family.
A SNT allows for members of the extended family and others who may care about the special needs child to contribute to the trust or to name the SNT as a beneficiary of their own estate planning.
It may seem obvious, but it is crucial to prepare to protect a special needs child early. It’s impossible to predict when a parent or guardian will die or become incapacitated and a special needs child will often rely solely on the preparations made by the parent. Don’t delay in establishing a SNT and ensuring that your child receives the best care possible.