A three-part series
By Laurie Hanson, Esq., Special Needs Alliance
There are an estimated 600,000-700,000 adults with intellectual and developmental disabilities (I/DD) in the United States who are living with aging family members and there is no plan in place for their future. Below, our colleagues from the Special Needs Alliance emphasize the importance of planning and trusts.
With the upcoming launch of the Center for Future Planning, The Arc is shining a spotlight on the need to encourage and support families to create person-centered future plans. The Center will provide practical assistance and resources on future planning items such as assisting the individual with daily and major life decision-making; housing and residential options and supports; financial planning; special needs trusts; and personal care and daily living supports.
The time to plan for your son’s or daughter’s future is now…and that means your future, as well. What a lot of people don’t know is that planning early, while seemingly expensive upfront, will save a lot of money and lead to better outcomes in the long run. Planning gives everyone peace of mind: you, your friends and family, and your son or daughter.
This is the first in a three-part series. This first installment is an overview of estate planning to protect your son or daughter with disabilities. The second will be an in-depth look at third party special needs trusts (SNTs) and third party pooled trusts. And the third will be an overview of first party SNTs and first party pooled trusts. You may want to read articles in The Voice, published by the Special Needs Alliance, which address these issues, as well. For instance, those articles discuss a 15-step approach to planning, guardianship, and letters of intent.
Estate Planning to Protect a Child with a Disability
The heart of a parent’s estate plan is ensuring that a son or daughter with disabilities lives in safe housing, has people supporting them, and maintains a good life after the parent is gone. The family must organize all of the son’s or daughter’s information, draft a letter of intent, and then ensure that all estate planning documents and nominations of any fiduciaries or agents are in place.
One of the most important goals of this planning is ensuring that the son’s or daughter’s public benefits are maintained after the parent dies and that there is money to provide for those things that the public benefits often do not cover (service animal expenses, therapies beyond the scope covered by the state’s health program, special foot care, assistive technology, communication devices, computers, someone to support your child, etc.).
The best way for a parent to achieve the financial goals is to establish a third party SNT or a third-party pooled trust sub-account for the son or daughter and direct all assets (retirement accounts, real property, investments, cash, etc.) to the third party special needs trust – either by beneficiary designation or in the parent’s will. If the trust is established correctly and the person or entity appointed to manage the trust or the pooled trust sub-account (called a trustee) manages the trust properly, the son or daughter will be able to maintain public benefits and still have services and supports that are not covered. Upon the son’s or daughter’s death, any money left in the third party special trust can go to other family members, a charity or wherever you want it to go.
You should also decide who will be the person who makes sure that your son or daughter still gets his or her Supplemental Security Income or Social Security Disability Insurance benefits (this is called the representative payee) and who will be the person who makes sure that your son or daughter still gets his or her Medicaid, SNAP, or housing benefits. This could be an authorized representative or, if necessary, a guardian. Different programs have different agents who can be appointed to carry this out. You should know who that person is, though!
What happens if you don’t plan?
If a son or daughter who relies on public benefits to meet daily needs – income, housing, food, and medical care – inherits money outright, the person will, in most cases, lose those benefits. If the person does not have capacity to manage his or her own money, a guardianship or conservatorship would have to be established so that the money can be managed for him or her. To maintain Medicaid and cash benefits, a first party special needs trust would have to be established – but this can be done only if the person is under age 65. Also, any money left in the trust upon the son’s or daughter’s death must be paid back to the state, up to the amount the state paid for Medicaid benefits.
SNTs can be complicated and state requirements vary, so families should work with professionals who are experienced with the nuances of changing government regulations. But the effort pays dividends, and the alternative may mean gambling with a loved one’s future.
The Special Needs Alliance (SNA), a national non-profit comprised of attorneys who assist individuals with special needs, their families and the professionals who serve them, has formed a strategic partnership with The Arc. The relationship is intended to facilitate collaboration at the local, state and national level on issues such as providing educational resources to families, building public awareness, and advocating for legislative and regulatory change.