10 Mar Long-term planning for a disabled child
Q. I have a son who is disabled. He lives in a group home and has a part-time job, but I have no idea where to start planning for him after I die. Can you offer resources, and what kinds of options do I have?
A. You should make an appointment with an attorney who specializes in special needs planning as soon as possible.
A smart option would be to establish a Third Party Special Needs Trust, or SNT, said Shirley Whitenack, an estate planning attorney with Schenck Price, Smith & King in Florham Parl.
This kind of trust would hold assets that otherwise might be inherited directly by the child with disabilities.
“This will ensure that the child can continue to get public benefits such as Medicaid and Supplemental Security Income (SSI) and have assets available for the child’s supplemental needs,” Whitenack said.
She said a financial advisor who specializes in planning for families with disabilities can help you determine how much money will be needed for this purpose, and whether term insurance or “second to die” insurance should be purchased to cover those costs.
“If the son is not mentally competent to make his own medical or financial decisions, the reader should make sure that his or her will appoints a legal guardian for the child,” she said.
She also recommends you prepare a “Letter of Intent.”
“Although this is not a formal legal document created by an attorney and no particular format is required, it is an important tool by which the parent memorializes the child’s needs in order to guide future guardians, trustees and caregivers,” she said. “Among other things, the letter of intent can address issues such as diet, medical care, religion, benefits received, employment, behavior management, residence and final arrangements.”
If you go the trust route, Nancy Heslin Reading, an estate planning attorney with Reading Law Firm in Newton, says there are many items you need to consider, including who would be a good trustee for the trust, who will be responsible with the money in the trust, and who will be attentive to your son’s needs.
“If you expect the trust to be under $100,000, you should investigate a `pool trust’ in your area,” Reading said. “Such trusts pool together many small trusts and invest them together for the benefit of each of the beneficiaries. Typically, the pool trust has its own trustee.”
Banks will often serve as trustees of SNTs that are funded with large amounts of money, and they do so for a fixed schedule of fees, Reading said.
“The best part about a Third Party Special Needs Trust is that Medicaid has no claim on the SNT upon your son’s death, assuming he is receiving Medicaid benefits,” she said. “Also, you can decide who you want to receive whatever is left in the trust (`the remainder’) when your son dies.”
Reading said for example, a parent will often want the remainder to go to their grandchildren if any funds are left when the trust beneficiary passes. You can name any remainder beneficiary that you want. Other parents name a charity.
Reading said it’s also important to distinguish between the Third Party Special Needs Trust and a Self-Settled Special Needs Trust. The Self-Settled version is funded with the assets of the beneficiary.
“For instance, if your son’s disability was the result of an accident of some kind and he received a personal injury award, typically that money would be used to fund a Self-Settled Special Needs Trust, so called because the money in it belongs to the beneficiary,” she said.
The most important difference between the two types of SNTs is that Medicaid can assert a lien against a Self-Settled SNT for the value of services provided upon the passing of the beneficiary, Reading said. Also, the statute that permits the funding of Self-Settled SNTs makes no provision for the appointment of remainder beneficiaries in a Self-Settled SNT.”
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This post first appeared in March 2015.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.