Don't Disinherit Your Special Needs Child

If you have a child with special needs, you face unique challenges when planning your estate. Depending on your child’s disability, he or she may one day rely on means-tested federal programs, like Supplemental Security Income (SSI) and Medicaid, to help pay for basic needs like food and shelter. These programs have income and asset limits, and lots of rules.
If you treat your disabled child like your other beneficiaries, you could make him or her ineligible for those benefits. That would be a waste of your assets, and could leave your child without the financial resources necessary to live the same kind of lifestyle you have been able to provide.  Unfortunately, this leads some parents to disinherit a child. This leaves your child in the same position. Medicaid and SSI will pay for only a very minimal standard of living.  
The cheap and dangerous way to handle this problem is to leave assets to another child along with unofficial instructions to “take care of” your special needs child. This may work on a short-term basis. But it is a risky long-term plan. Should your beneficiary develop financial problems or a change of priorities, your special needs child will suffer the consequences. If your beneficiary passes away or become incapacitated, those assets may no longer available to your special needs child. Finally, this can just become a burden to your other children.  
A much better option is to set up a Special Needs Trust for your child.  This trust lets you leave your special needs child an inheritance without jeopardizing his or her eligibility for benefits. The funds are protected, and can be used to supplement your child’s standard of living.  Special Needs Trusts are complicated. So you need the help of an attorney who is experienced in this area. There are different types of special needs trusts, and they are frequently drafted incorrectly.  
Special Needs Trusts can be incorporated into your Will.  However, your Will becomes a public record when it is probated.  This means that anyone can find out their details of the trust. This could put the vulnerable beneficiary of your special needs trust at risk for being harmed by financial predators. If your beneficiary has a high risk of exploitation, you may not want your child’s trust and the amount of money that goes into the trust to be a public record. A special needs trust that is established outside a will, in either a revocable living trust or a standalone special needs trust can remain totally private. No one other than the people who need to know the trust details can have access to them.
If you have a loved one with special needs, we can help you evaluate the alternatives and help you plan appropriately for the future.