Estate Planning for a Special Needs Child
Mary Anne and Bob Meskis knew now rather than later was the time to plan for the financial security of their son, Elliot, who lives with Dravet syndrome. Dravet syndrome, which is a rare, catastrophic, lifelong form of epilepsy, begins in the first year of life with frequent and/or prolonged seizures. As the patient ages, they face additional difficulties, including a lagged development of language and motor skills, developmental delays, hyperactivity and sleep difficulties, chronic infection, growth and balance issues and difficulty relating to others.
“We knew that Elliot would be unable to ever live independently and that he’d require assistance for the rest of his life,” Mary Anne shared. “But what if he outlived us? We wanted to know he wouldn’t be at risk.”
Many parents of special needs children work with specialized legal estate planners to ensure their dependent’s financial security and well-being are monitored and maintained even after they can’t due to death or incapacity. Special needs trusts, or SNTs, assist parents in planning for the welfare of children who cannot take care of themselves. Mary Anne and Bob turned to Oak Brook, Illinois, attorney Darcy Chamberlin, a Fellow of the American College of Trust and Estate Counsel and a member of the Special Needs Alliance, to develop their plan of protection.
“The child will likely be dependent as an adult, perhaps vulnerable as an adult, and they can benefit from having the protection of a trust and a trustee, an individual at a bank or a third-party professional trustee manager,” commented Darcy. “This person would be charged with managing the money the parents leave for that child so it’s protected for the benefit of the child for her lifetime. This could be a child with mental health issues, developmental disabilities or intellectual disabilities that impair the child’s ability to navigate the world on their own.”
Special needs trust isn’t a legal term but a description of types of trusts allowing the family to design a financial plan to ensure their child is protected. At the same time, the dependent will retain the maximum use of needs-based governmental benefits. Some SNTs are funded by monies left to the child in estates of parents or grandparents or awards that may come to the child due to personal injury settlements. Because of the condition they have, the child may not be able to make sound financial decisions and, worst of all, could be swindled out of their inheritance. For protection, the trustee or trustees are given broad powers in making financial judgments for them.
“We often include statements as to how the parents want the money used for the benefit of the child,” stated Darcy. “These declarations of the parents that are captured by the special needs trust mean we are supplementing governmental benefits that might be available with the resources of the family. We want to maximize the governmental resources that are obtainable.”
Darcy recommends parents work with financial planners to create a monetary strategy for the benefit of the child. When that plan is developed, Darcy can sit down with the parents to construct the best estate tactic to cover the finances the dependent would need during his lifetime. If the child dies and money is left in the trust, it will be distributed to other beneficiaries such as surviving siblings.
Parents may want to complement their SNT with a 529 ABLE account. Money can be withdrawn tax-free at any time when the funds are used to pay for qualified disability expenses. However, there are limitations on the amount of funds that can be contributed from all sources each year. Close attention must be given to the account balance because it could negatively impact eligibility for Supplemental Security Income, or SSI. In addition, if the child passes away, some states can recoup assets left in the account to cover Medicaid expenses for the child.
“529 ABLE, or Achieving a Better Life Experience Account, allows parents to save small amounts of money for the child,” shared Darcy. “But they don’t replace the type of trusts that we set up for the benefit of the child. It would not be the account the parents would use to place the inheritance that they would want to leave for their child.”
Raising a dependent with a disability is difficult and complicated, but ensuring the financial well-being of your special needs child must be added to your to-do list. If not, you’re jeopardizing the child’s welfare when you’re gone. Put the best plan in place now, review it periodically and give yourself peace of mind. With the right documents, you can ensure your child is taken care of in the event of your death or incapacitation. Always check with a professional estate planning attorney knowledgeable of the laws of your state and county to ensure your document is legally correct. ■
Sources: specialneedsalliance.org.
