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Parenting a child with special needs be financially, emotionally, and physically challenging. It can also make a parent feel isolated and alone. It may help to know how many other Americans are navigating similar issues as evidenced by the following facts and figures:
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- Nearly one-fifth of all Americans have a physical, sensory, or intellectual disability, according to the National Organization on Disability.
- More than 41 million Americans, or almost 15% of the population age 5 and older, have some type of disability.
- Out of 72.3 million families included in the US Census Bureau Report, about 2 in every 7 reported having at least one member with a disability
- 9 million families have members with a disability
- One in every 26 American families reported raising children with a disability
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A child with special needs can look forward to living a much more independent life as an adult that would have been possible several decades ago; however, your child may continue to depend on specialized medical and/or therapeutic care when he/she reaches adulthood. If you have the financial resources to continue helping your child as an adult, you may want to do so. The problem is that giving your child money, or other assets, could jeopardize his/her eligibility for assistance programs such as Medicaid and Supplemental Security Income (SSI). A special needs planning component incorporated into your estate plan can prevent that from happening.
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State and federal assistance programs often provide crucial services to children and adults with special needs. These programs, however, have both income and asset limits that apply to eligibility. Once your child is legally considered an adult any financial help you offer will count against those limits, potentially causing your child to lose important benefits. That includes financial help while you are alive as well as direct gifts made to your child in your estate plan.
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Special needs planning makes it possible for you to continue to contribute to your child during your lifetime and after you are gone while also taking into account the need for continued eligibility for assistance programs. A common estate planning tool used within a special needs planning component is a specialized trust known as a “special needs trust.”
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A special needs trust, also referred to as a “supplemental” needs trust, or “SNT,” is a specialized irrevocable living trust that allows you to continue to provide for your child without jeopardizing his/her eligibility for assistance. Assets held in a SNT are used to “supplemental” the care and maintenance provided by assistance programs without affecting your child’s eligibility for the programs. Very specific language must be used when creating a SNT to ensure that it is recognized as such by state and federal assistance programs.
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The purpose of a SNT is to allow loved ones to provide “supplemental” assistance to someone who depends on assistance from programs such as Medicaid and SSI. Therefore, assets held in an SNT can only be used to purchase extras such as a vehicle, a vacation, or furniture that is not provided by any of the government assistance programs.
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A first party, or self-settled, special needs trust is established using assets owned by the person with special needs. It must be established by the parent, grandparent, or guardian of the child with special needs, or by a court. This type of special needs trust is most frequently needed when a child with special needs receives a lump sum of money as a settlement for injuries in a lawsuit. The lump sum would likely disqualify the beneficiary from eligibility for assistance from Medicaid, SSI, and other state and federal assistance programs.
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This type of SNT is established by a third party (a parent, grandparent etc.) using assets owned by the third party. The assets are intended to be used for the benefit of a person with special needs. This type of trust must include specific language and must be worded such that the assets in the trust are distributed to a third party, such as the parent, to be used for the benefit of the individual with special needs.
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Contact Us
The North Carolina estate planning attorneys at Clarity Legal Group are dedicated to helping you with all your estate planning needs, both now and in the future. Contact the team today by calling 919-484-0012 or contact us online.
