Planning for Family Members with Special Needs
By Bernard A. Krooks,
Certified Elder Law Attorney
Estate planning is very important. If done properly, you can make things easier for yourself and your loved ones. Without proper planning, there is the potential for unnecessary court involvement, increased legal fees, higher taxes, and other complications. If you are the parent of a child with a disability, the stakes go up exponentially. It is critical that your own estate plan addresses a number of issues that could arise as a result of your child’s disability. For example: (1) Does your child have the capacity to manage any inheritance you might leave him? (2) What effect, if any, will the receipt of the inheritance have on any government benefits, such as Social Security or medical coverage, the child is receiving or is expected to receive in the future? and (3) Who will replace you? We know that no one can truly replace a parent; however, we still must have a plan in place to ensure that everything you do for your child continues to get done when you are no longer here. Figuring out this piece of the puzzle could be the most important thing for you to do!
One crucial step in helping you accomplish your objective of providing the best quality of life for your child in the most financially secure way is the establishment of a trust. While we have often stressed the importance of utilizing trusts in your estate plan, they have particular value when you have a child with a disability. If you leave your property to the trustee of a trust instead of leaving the property outright to your child with disabilities, the trustee can manage and invest the trust assets for the benefit of your child. If a professional trustee is chosen, then the funds will be professionally managed and invested, and the trustee will take care of all tax filings and accountings. The trustee should also make sure that all proper expenditures of trust assets are made for the benefit of your child at the appropriate time. Selection of the proper trustee is critical to ensure that your estate plan is carried out the way you envisioned it. Another benefit of a trust is that, if drafted properly, the assets owned by the trust will not disqualify your child from any government benefits he receives or might receive in the future.
One of the many benefits of trusts is that they can be specifically tailored to meet the individual needs of your child. Other times, it makes sense to give the trustee broad discretion to do what is best for your child in terms of when and what types of distributions may be made. Importantly, the trust must be drafted as a “special needs trust.” This will help ensure that your child will have access to government benefits and the trustee will also be able to pay for things that will improve the quality of life of your child that are not provided by the government programs.
Every special needs trust will be different since each child and his situation is different. To the extent possible, your child may be engaged in the decision-making, and a good trustee will encourage that. In fact, the trust can even provide that the trustee can make an annual contribution (currently limited to $16,000) to an ABLE account for the beneficiary — giving even more autonomy and direct benefit to your child with a disability. ABLE accounts are not subject to income tax and do not adversely affect the beneficiary’s access to government benefits.
It is critical that you work with an experienced attorney who is knowledgeable in special needs trusts and special needs planning. While there are many lawyers who do this type of work, many of the best-known and most experienced belong to the Special Needs Alliance (www.specialneedsalliance.org), an invitation-only group of lawyers who have met the rigorous requirements in order to become members. They are far from the only choice, but they are often a good place to start.
Bernard A. Krooks, Esq., is a founding partner of Littman Krooks LLP. He was named 2021 “Lawyer of the Year” by Best Lawyers in America® for excellence in Elder Law and has been honored as one of the “Best Lawyers” in America since 2008. He was elected to the Estate Planning Hall of Fame by the National Association of Estate Planners & Councils (NAEPC). Krooks is past Chair of the Elder Law Committee of the American College of Trust and Estate Counsel (ACTEC). (914-684-2100 www.elderlawnewyork.com)