Often, parents of children with special needs try to resolve these issues by leaving their estates to their other children, leaving nothing to the disabled children. They have a number of reasons for this approach: The disabled child shouldn’t receive anything because she can’t manage money and would lose her benefits. She doesn’t need any inheritance because she will be taken care of by the public benefits she receives. The other children will take care of their sister.
This approach is to be discouraged for a number of reasons. First, public benefits programs are often inadequate. They need to be supplemented with other resources. Second, both public benefits programs and individual circumstances change over time. What’s working today, may not work tomorrow. Other resources need to be available, just in case. Third, relying on one’s other children to take care of their siblings places an undue burden on them and can strain relations between them. It makes it unclear whether inherited money belongs to the healthy child to spend as he pleases, or whether he must set it aside for his disabled sister. If one child sets money aside, and the other doesn’t, resentments can build that may split the family forever
Special needs planning typically involves the creation of a special needs trust. This trust provides a safe way for you to leave money to an heir with special needs, without having to worry about whether the bequest might interfere with benefit eligibility. The structure of the trust and its terms help to provide a wall of separation between the heir’s finances and the money in the trust.
You need to assign a trustee who will be responsible for managing the money in the trust. That person has a duty to ensure that trust funds are used to benefit the disabled heir, but in ways that do not run into conflict with government benefits. Typically, this means that trust assets are used to pay for needs that benefits do not. For example, government benefits for the disabled do not always cover educational needs. Your trust can do so without affecting those benefits.
The terms of the trust need to be set up in a way that enforces that clear separation between the trust assets and the heir. This typically involves the use of trust provisions that affirmatively declare that the trust cannot be used to pay for basic needs already covered by those benefits, as well as clear instructions about the types of needs for which the trust can be used.
Special needs planning should be done as part of a more comprehensive estate planning effort, since you will need a broad plan that ensures that you have the funds you need to create the special needs trust. This estate planning will often involve things like business, financial, and retirement planning, to create a cohesive strategy that facilitates the asset growth and accumulation needed to properly create a fully-funded special needs trust.
