By: AVID Esq. Group LLC August 30, 2023

Special Needs, Special Plans: A Guide to Estate Planning for Special Needs Adults

Key Takeaways

Estate planning for special needs adults is crucial in securing their future and access to necessary care and support.
A variety of tools, such as wills, trusts, and life insurance, can be utilized to create tailored estate plans.
It’s essential to seek the expertise of an estate planning attorney for guidance on creating the most effective plan for your loved one’s specific needs.

Understanding Special Needs Adults

When it comes to estate planning for special needs adults, you may feel overwhelmed by the many components involved. But don’t worry, we’re here to help you make sense of it all.

First, let’s define the term “special needs.” This phrase encompasses a wide range of disabilities, including physical, intellectual, mental health, and medical conditions. Each individual with special needs has different support requirements, so it’s vital to tailor your plan to suit their unique circumstances.

Estate planning for special needs adults is particularly crucial because it ensures their financial future is safeguarded without jeopardizing essential government benefits they may rely on, such as Supplemental Security Income (SSI) and Medicaid. A Special Needs Trust (SNT) is an excellent estate planning tool for this purpose.

How do you create an SNT? Collaborate with an experienced attorney who specializes in special needs planning. We’ll carefully craft the trust to comply with state and federal regulations, protecting your loved one’s assets without risking their eligibility for vital government programs.

It’s worth noting that when estate planning for people with special needs, you should never disinherit the individual. Many make this mistake, thinking that it will protect the person’s eligibility for public benefits. Instead, carefully consider how to include them in your plan and consult with an attorney specializing in special needs trusts and planning to ensure you are making the best decisions for your loved one’s future.

The Basics of Estate Planning

Estate planning is an essential process that helps you prepare for the future and protect your loved ones, especially if you are the caretaker of a special needs adult. Having an estate plan in place will ease the burden on your family, ensuring your wishes are honored while maintaining your loved one’s quality of life.

To get started with estate planning, you should first consult with a knowledgeable estate planning attorney, who can guide you through the process of creating a customized plan. Professional advice is crucial in navigating the complex world of estate planning, as well as in ensuring all legal documents are in order.

One of the primary components of an estate plan is a will, which outlines how your assets will be distributed upon your passing. A properly drafted will allows you to designate a guardian for your special needs loved one and provide instructions on their ongoing care. This can give you peace of mind knowing that they will continue to receive the support they need.

In addition to a will, you should also consider establishing a power of attorney. A power of attorney appoints someone you trust to make financial and healthcare decisions on your behalf, in case you become incapacitated. This is particularly important for caretakers of special needs adults, as they often rely heavily on the decision-making ability of their guardians.

The Importance of a Will

When it comes to estate planning for special needs adults, having a well-prepared will is crucial. So, why is a will such an essential document in the planning process? Let’s dive into the reasons.

First and foremost, a will allows you to designate who will inherit your assets when you pass away. This is especially important for families with special needs adults, as you want to ensure that their financial needs are taken care of. By specifying in your will how your assets will be distributed, you can provide for your loved one with special needs without jeopardizing their eligibility for government benefits, like Supplemental Security Income (SSI) and Medicaid.

Moreover, a properly drafted will can help you establish a Special Needs Trust. This type of trust allows you to set aside assets for your special needs loved one, ensuring that they have the financial resources they need without affecting their qualification for public benefits. It’s a win-win situation: your loved one can benefit from the funds while preserving their access to crucial government assistance programs.

In addition, a will gives you the opportunity to appoint a guardian for your special needs adult, exemplified here. Choosing the right guardian is of utmost importance, as this person will be responsible for your loved one’s care and well-being when you’re no longer around. Make sure you discuss this with the potential guardian beforehand and ensure that they are willing and able to take on the responsibility.

Introduction to Trusts

When it comes to estate planning for special needs adults, one important tool you might consider using is a trust. A trust can provide numerous benefits to your loved one, and in this section, we’ll provide a brief introduction to trusts while focusing on some key entities like the trust itself, the trustee, and the beneficiary. Remember, we’re here to help make this process as easy as possible for you.

First off, let’s talk about what a trust is. A trust is a legal arrangement where one person (the trustee) holds and manages assets for the benefit of another person (the beneficiary). In the context of special needs adults, a common type of trust is the Special Needs Trust, designed to protect your loved one’s assets without jeopardizing their eligibility for government benefits like Supplemental Security Income (SSI) and Medicaid.

Now let’s dive into the role of the trustee. The trustee is responsible for managing the trust’s assets and ensuring that they are used for the benefit of the beneficiary. Their duties include investing the trust’s assets, making distributions to the beneficiary as needed, and filing required tax returns. It’s important to choose a trustworthy and capable trustee, as they play a crucial role in making sure the trust fulfills its purpose.

Lastly, let’s not forget about the beneficiary – the person for whom the trust is established. In a special needs trust, the beneficiary is typically a disabled individual. The trust is set up to provide financial assistance and protect the beneficiary’s eligibility for government benefits. It’s essential to carefully draft the trust’s terms to ensure that they align with the beneficiary’s unique needs and any applicable legal requirements.

Special Needs Trusts

Now let’s get into the specifics of the Special Needs Trust (SNT). These trusts allow individuals with disabilities or functional needs to receive financial support without negatively affecting their eligibility for government-offered benefits like Supplemental Security Income (SSI) and Medicaid.

You might be wondering, how does a Special Needs Trust work exactly? Well, it’s designed to preserve assets for the beneficiary (the person with special needs) while still allowing them to access public benefits they are entitled to. By setting up an SNT, you can better protect your loved one and help ensure their long-term financial stability.

When it comes to creating a Special Needs Trust, there are a few key points to keep in mind:

Choose a Trustee: This person will manage the trust and ensure that funds are used appropriately for the beneficiary. You’ll want to pick someone who is trustworthy, financially responsible, and understands the unique needs of the beneficiary.
Fund the Trust: Consider the financial needs of the beneficiary and plan for the future. This can include investing in a mix of stocks, bonds, and other assets to help the trust grow over time. Make sure that the trust includes enough resources to cover the loved one’s ongoing needs.
Understand the Different Types of Special Needs Trusts: There are multiple forms of Special Needs Trusts (e.g., First-Party, Third-Party, and Pooled Trusts), so it’s essential to research which one best fits your loved one’s circumstances. Consulting with an experienced attorney can be an excellent way to determine the most appropriate type of trust for your individual needs.

The Pooled Trust Option

When you’re considering estate planning for a special needs adult, a popular option you should explore is the pooled trust. It’s a type of pooled special needs trust administered by a nonprofit organization, which offers several benefits in managing and protecting assets without jeopardizing the individual’s access to government benefits.

So, what exactly is a pooled trust? Well, it’s an already-established special needs trust, which means you won’t need to draft a new one. As the name suggests, the trust pools together assets from various individuals to create a larger investment pool. This arrangement makes it more affordable and accessible, especially for those with modest means.

One of the primary benefits of a pooled trust is that it preserves the special needs individual’s eligibility for public assistance programs, such as Supplemental Security Income (SSI) and Medicaid. The nonprofit organization managing the pooled trust will handle the administration and ensure that the beneficiary’s needs are met without impacting their access to crucial benefits.

But how does this work? By joining a pooled trust, your loved one’s assets are combined with other beneficiaries’ assets for investment and management purposes. The nonprofit organization will allocate a separate account for each beneficiary, keeping track of their share and ensuring that the funds are used to meet their specific needs.

Now, you might be thinking – is a pooled trust right for our situation? Pooled trusts can be a great option when creating a standalone special needs trust isn’t practical or financially viable. They’re typically ideal for smaller estates or when you want the security of having a trust managed by experienced professionals.

Ultimately, you’ll need to weigh the pros and cons of a pooled trust based on your unique circumstances. Remember, estate planning for special needs individuals is all about finding the best solutions to protect and support your loved one. So, take the time to explore all your options and make the most informed decision for their future.

Choosing Guardians for Special Needs Adults

When it comes to estate planning for special needs adults, selecting the right guardian is an essential part of the process. A guardian is responsible for monitoring the care and well-being of the person with disabilities, commonly referred to as the protected person. So, how do you choose the best guardian for your loved one?

First, consider the potential guardian’s willingness and ability to take on this crucial role. The guardian does not need to use their own money for the protected person’s expenses or provide daily supervision, but they should be prepared to ensure the person is receiving proper care, housing, and support. Therefore, select someone who is compassionate, responsible, and committed to the well-being of your family member.

Next, assess the candidate’s knowledge and understanding of the protected person’s specific needs. This may encompass medical, emotional, educational, and social aspects. Having a guardian who is familiar with the person’s condition and can actively address their needs will significantly contribute to enhancing their quality of life.

It’s also important to think about the potential guardian’s age, health, and stability. Ideally, you want someone who will be able to fulfill their duties for the long term. This includes being physically and emotionally capable of handling the responsibilities that come with guardianship.

Another vital factor to consider is the candidate’s location. While a guardian does not need to live with the protected person, being in close proximity can make it easier for the guardian to facilitate appropriate care and maintain frequent communication and visits. So, choose someone who lives nearby or is willing to travel and be readily available when needed.

Remember that guardians are appointed by the court, and any changes to the guardianship, such as the appointment or removal of a guardian, require consent from the court. Therefore, it’s crucial to involve an attorney who specializes in special needs estate planning to ensure a smooth process.

Supplemental Security Income & Medicaid

Let’s chat about two crucial programs when it comes to estate planning for special needs adults: Supplemental Security Income (SSI) and Medicaid. These programs significantly impact the welfare and financial stability of individuals with disabilities, so it’s essential to get a grasp on how they work.

SSI is a federal program that provides financial assistance to people who are elderly, blind, or disabled. It offers a monthly income to help cover basic needs, making life a little easier for those who qualify. To be eligible for SSI, you must have limited resources and a disability that prevents you from engaging in substantial gainful employment. However, the rules surrounding SSI can be complex, so it’s always a good idea to consult an expert.

Now, let’s talk about Medicaid. Medicaid is a state and federal program that provides health coverage to eligible low-income adults, including individuals with disabilities. It can help cover the cost of a broad spectrum of medical treatments and services. Like SSI, there are specific eligibility requirements you need to meet to qualify for Medicaid benefits.

Now that you have a basic understanding of what SSI and Medicaid are you may be thinking, “How does estate planning fit into all this?” That’s an excellent question! When dealing with estate planning for special needs adults, it’s essential to consider how your assets will affect their eligibility for these essential government programs. For instance, leaving a direct inheritance could potentially disqualify them from receiving SSI and Medicaid benefits.

So, what’s the solution? Well, special needs trusts of course. These trusts serve as a valuable estate planning tool that allows you to financially support a person with a disability without jeopardizing their access to essential government benefits. By setting up a special needs trust, you’re ensuring that your loved one continues to receive their SSI and Medicaid benefits while also having access to additional financial resources.

The Role of Life Insurance and IRAs

When considering estate planning for special needs adults, it’s important to explore the role of life insurance and IRAs. These financial products can help provide long-term financial stability for your loved one without jeopardizing their government benefits.

Life Insurance

Life insurance can play a critical role in providing financial support for your special needs adult. A permanent life insurance policy can help cover the costs of future care and living expenses. One option is to name a Special Needs Trust as the beneficiary of the policy. This approach ensures that the payout from your life insurance policy goes directly into the trust, which can then be managed by a trustee for your loved one’s benefit. This can prevent the funds from disqualifying them from government assistance like Supplemental Security Income (SSI) and Medicaid.

IRAs

Individual Retirement Accounts (IRAs) can also play a role in estate planning for special needs adults. An IRA can provide additional financial support for your loved one after you have passed away. To ensure the IRA funds are managed properly, consider naming a Special Needs Trust as the beneficiary of your IRA account. This way, the funds are protected and can be used for the care and support of your special needs adult without affecting their eligibility for government assistance.

Working with an Estate Planning Attorney

When it comes to estate planning for special needs adults, finding the right estate planning attorney is crucial. The process can be complex and unique to each individual, so having an attorney who is knowledgeable and experienced in handling special needs issues is essential.

One option to consider is the estate planning attorneys at AVID Estates, We are licensed in Arizona and Colorado and offer comprehensive estate planning services for both families and small business owners.

Choosing an attorney who is well-versed in special needs trusts, guardianship planning, and Supplemental Security Income (SSI) and Medicaid eligibility is vital. You want to ensure that your loved one’s financial future is protected and that they can continue receiving government benefits without any issues.

When working with an estate planning attorney, it’s important to ask the right questions. Find out about their experience in special needs planning, strategies they recommend for preserving government benefits, and whether they are familiar with various types of special needs trusts.

Don’t be afraid to discuss your specific concerns with the attorney. By openly communicating your needs and goals, you can ensure that the estate plan is tailored to your family’s unique situation.

Remember, estate planning for special needs adults may require ongoing communication with your attorney, especially as laws and benefits change. Having a strong working relationship with an estate planning attorney who is knowledgeable in this area will ensure that your loved one’s future is secure.

Final Verdict: Estate Planning for Special Needs Adults

In the journey of life, planning for the unknown becomes crucial, especially when it involves the well-being of a special needs adult. While the landscape of estate planning for special needs adults can feel overwhelming, it’s a critical step to provide both financial stability and peace of mind for your loved ones. A carefully constructed plan not only ensures that they are well taken care of, but also that their quality of life is upheld in a way that honors their unique needs.

Ready to make this important life decision but don’t know where to start? At AVID Esq Group, we specialize in crafting specialized estate plans that protect the financial and emotional welfare of special needs adults. Schedule a free consultation with us today, and take the first step in securing a brighter, more secure future for your loved one.