Developing an Estate Plan for Parents of Children with Special Needs: A Step-By-Step Approach

October is National Special Needs Law Month, which is an effort to provide legal education to the families and caregivers of those with special needs. If you have a child with special needs, it’s crucial that you plan for their future. The urgency is real: Anything could happen at any time to leave you or your child at risk. It could be your death or the development of an illness or injury that impairs your ability to care for yourself or your child. Before you face an event that creates confusion as well as financial hardship, you should take the time to create an estate plan. This will not only protect the future of your child with special needs, but it will provide peace of mind to the entire family in the meantime.

There are several steps involved in developing an estate plan, but with the help of an estate planning attorney, they do not need to be as daunting as they seem. Here is an overview.

STEP 1: GATHER AND ORGANIZE NEEDED INFORMATION

It’s best that you put together the information that is needed to create a thorough plan—and get it organized. It will likely take a lot longer for someone else to make sense of your organizational system—or lack thereof. Here are some tips:

• Get a file box where you can keep labeled files. Or if you’d rather do this digitally, you can set this up on your personal computer. (If you opt for the latter, make sure you password protect everything—then share that information with someone else in case something happens to you.)
• Create a document with all of your and your child’s personal information (name, nicknames, date and place of birth, phone numbers, Social Security number, Medicare number, addresses, etc.). In a separate folder, keep copies of birth certificates, military service records, deeds, insurance policies, stock certificates, spouse’s death certificate, marriage certificates, social security cards, automobile titles, divorce decrees, usernames, and passwords.
• Make a list of three emergency contacts and include their information. Also include contact information for your spouse, partner, or significant other, children, siblings, and parents. Include information for any other trusted person who could care for your child in case of emergency.
• Create a document that includes the names and contact information of medical providers and specialists along with medical history.
• Include financial information from employment, social security, supplemental security income, etc., and the current value of any asset, the death benefit (if any), and all beneficiary designations associated with the asset. Include policy numbers and contact information, the names of financial advisors, a copy of your most recent tax statement, and a section on recurring bills and how they are normally paid. If your child has any representative payee accounts and special needs trust accounts, include that information as well.
• Legal documents such as your will, healthcare directives, and power of attorney should be included, along with the names of any attorneys.
• Most people today use online banking for most of their financial life and also have other accounts, such as email, photo storage, social media, etc. Make sure your login credentials are available and stored in a secure place.

Store these items in a safe place—either physically or digitally—and let the important people in your life know how to access this information.

STEP TWO: MEET WITH AN ESTATE PLANNING ATTORNEY TO MAKE A PLAN TO PROVIDE FOR YOUR CHILD WITH SPECIAL NEEDS

An attorney experienced in working with families with special needs children can draft the necessary documents for expressing how you want your property, finances, health care, and care of your children handled following your death and/or incapacity. An attorney can also help you set up financial strategies, such as trusts, to ensure that your child with a disability can continue to maintain a quality life when you are gone. Make sure this attorney is familiar with Medicare, Medicaid, Social Security, and Supplemental Security Income (SSI) and the unique challenges that a disability brings to the estate planning process.

SPECIAL NEEDS TRUSTS

Children and adults with disabilities often rely on public benefits, especially Supplemental Security Income (SSI) and Medicaid. Because these programs are based on need, they have strict income and resource limits. This can be problematic when it becomes necessary to transfer certain resources. This could trigger ineligibility for benefits. One solution to this potential problem is a special needs trust. This type of trust can be a crucial tool to improve the life of a person with a disability.

Special needs trusts allow you to set aside funds for an individual with a disability, without jeopardizing their eligibility for public benefits. Because the money in the trust is not held in the name of the beneficiary, it does not count as a source of income when it comes to determining benefits for SSI and Medicaid.

ABLE ACCOUNTS

ABLE accounts recently became available as a planning tool for family members with special needs. Created by the Achieving a Better Life Experience (ABLE) Act, these accounts were introduced in New York state in 2017.

ABLE accounts allow an individual with a disability to save money without losing their eligibility for public benefits. They are similar to special needs trusts, but with important differences:

• ABLE accounts are tax-advantaged accounts that are comparable to 529 savings plans for college. As long as the balance stays at $100,000 or less, funds deposited in an ABLE account do not count as resources for Medicaid eligibility nor do they impact SSI eligibility.
• The maximum amount that can be deposited in an ABLE account per year is the same as gift tax exclusion amount for federal income tax, which is $15,000 in 2021. The maximum that can be contributed over time is the same as the state’s maximum for 529 accounts: $520,000 in New York state.
• Contributions are not tax deductible, but they do fall within the gift tax exclusion. Distributions are not taxed as long as the funds are used for expenses related to the person’s disability, such as housing, transportation, education, and assistive technology.
• ABLE accounts are only available to people whose disability began before age 26. It should be noted that special needs trusts have no such restriction. However, an individual may have both a special needs trust and an ABLE account.

TRANSITION PLANNING

When a child with special needs is approaching adulthood, there are significant changes. In the New York state school system, a child’s right to special education services will end when the child receives a high school diploma, or ages out of the school system at 21. This means you will have to consider options for a residence, as well as additional education, employment, and social activities into adulthood. Transition planning should be a major focus during the high school years.

Whether your child plans to attend college or other postsecondary educational institution, you will need to secure the necessary tools to accommodate their disability. If the child plans to seek employment, the child’s high school years are a good time to explore community organizations that can assist with vocational programs, as well as housing, transportation, and other needs. Your special needs planning attorney can help you find these types of resources.

GUARDIANSHIP

As your child with special needs approaches adulthood, it is also time to determine whether guardianship will be necessary. Parents are used to making legal and medical decisions for their child, but without guardianship, those powers will end when the child turns 18.

If your child will not have the capacity to make such decision, then guardianship proceedings need to be initiated a year or more before the child turns 18. In New York State, for a child with special needs turning 18, an Article 17-A guardianship is filed in Surrogate’s Court.

LETTER OF INTENT

This is not a legal document but rather a set of instructions for a future caregiver about your child’s specific abilities, interests, and needs. Crucial details about the child’s medical, social, educational, and behavioral requirements are documented in this letter, which will be crucial information in the event that you are no longer able to care for your child. A special needs estate planning attorney can help you draft something that clearly communicates your wishes for your child.

STEP THREE: REVIEW AND UPDATE YOUR PLAN ON A REGULAR BASIS

Remember that planning for the future is a process; it’s not a one-and-done procedure. As circumstances change for your family, you will need to revisit your plan and make updates. In many cases, you will need the guidance of an estate planning attorney.

Consulting with an attorney who is familiar with special needs trusts and disability benefits will help ensure that you have done everything possible to provide for your child with disabilities.

Don’t put off estate planning for your special needs child. It will bring you peace of mind knowing that you have planned in advance for the time when you may no longer be able to manage your own or your child’s financial and healthcare matters. For help with estate planning in Westchester County, contact The Browne Firm at 914-530-3070.