SPECIAL NEEDS PLANNING – PART 4
by: Begley Law Group
by Thomas D. Begley, Jr., Esquire, CELA
Ten Common Mistakes in Special Needs Planning
- Leaving Assets Directly to Your Special Needs Child.
Many parents leave a Will leaving assets outright to their children including their special needs children. This mistake renders the child ineligible for means-tested public benefits including SSI and Medicaid. Best practice dictates that the parents leave the assets to the child in a Special Needs Trust to maintain the public benefits of the special needs child.
- Dividing Assets Equally Among All Children.
The natural instinct of parents is to divide their assets equally among their children on death. Parents love their children equally and want to treat them fairly. The problem is that if there is a special needs child who is unable to work and support themselves, the child will have greater needs. Best practice dictates determining what the special need child may need and carving that out first, then dividing any remaining assets among the healthy children who are able to support themselves. This often requires the purchase of whole life insurance.
- Failure to Start with a Life Care Plan.
A Life Care Plan can be designed by a professional or by a family member with the assistance of professionals. The Life Care Plan should begin by identifying the future needs of the family member with disabilities and establishing a standard of living that the parent wants for that child. The cost of the standard of living should then be established. This would include a discussion of immediate cash needs such as a home, a vehicle, repayment of debt, clothing and shoes, a computer, a cell phone, etc. A monthly budget should then be established, which would include shelter, transportation, and personal needs. How will all of these needs be met financially? The child may be receiving some benefits, and some can be paid for by accessing the trust. Assuming the trust can pay 3.3% per year for annual maintenance of the child with disabilities, how much will be required to fund the trust? Does the parent have sufficient assets? If not, will whole life insurance be required?
- Failure to Access Public Benefits.
Many parents who have children with disabilities apply for SSI for their child with disabilities prior to the child attaining age 18 and are rejected. The parents do not realize that after age 18 the income and assets of the parents are no longer deemed to the child with disabilities and another application should be made to qualify the child for SSI. In New Jersey, an individual receiving SSI automatically receives Medicaid.
- Failure to Maximize Public Benefits.
Parents often fail to maximize public benefits available to a disabled child. Parents commonly provide food and shelter for their child with disabilities and the child receives a one-third reduction in his or her SSI payment. By executing a Lease with the child with disabilities and receiving payment from the child’s SSI payment for food and shelter, the SSI payment can be maximized. The one-third reduction in the SSI payment for 2023 amounts to $304.67 per month. Parents often overlook other public benefits that may be available including those set for the previously in the paragraph titled Public Benefits. These should be explored and eligibility for these public benefits should be considered.
- Failure to Obtain Guardianship.
Many parents fail to obtain guardianship for their child upon the child attaining age 18 when that child is incapacitated and unable to make decisions. Without a guardianship, the parent really has not legal authority to make medical or financial decisions on behalf of the child. Parents could be appointed Guardian of the Person or Guardian of the Property.
- Obtaining Guardianship When Guardianship is Not Necessary.
In many instances once a child is 18 and has limited ability to make decisions, the child may be able to make decisions with the support of a person such as a parent, family member, friend, or organization. The alternative to an unnecessary guardianship would be a Supported Decision-Making Agreement.
- Failure to Obtain a Living Will and Power of Attorney for a Child with Disabilities.
Often a guardianship can be obtained by having a child with disabilities execute a Medical Power of Attorney and Financial Power of Attorney appointing parents or other family members as Health Care Representative for purposes of making medical decisions or as Agent under a Power of Attorney for the purpose of making financial decisions.
Many clients wait too long to plan. The longer a client waits to plan, the less likely it will be that sufficient assets will be set aside to provide the necessary standard of living for the child with special needs.
- Relying on Other Family Members to Take Care of the Special Needs Child.
Other family members, particularly siblings, are often ready, willing, and able to assist with providing care for a family member with disabilities. However, when the time comes to provide that assistance, problems often arise. Frequently, there is an understanding that the child with special needs will live with a sibling. Sometime this works; often it does not. Occasionally, the spouse of the sibling strenuously objects, and sometime the sibling themselves realizes that this undertaking would be enormous. Often, a sibling is willing to offer limited assistance, such as working with a disability organization or trustee, to ensure that the Life Care Plan developed for the child with special needs is properly implemented. In most cases, this is a realistic target.
Ten Steps in Planning for My Special Needs Child
- Retain a Competent Special Needs Trust Attorney.
The first step in planning for a special needs child is to retain a Special Needs Trust Attorney who is experienced in assisting families with special needs children. Many Estate and Trust Attorneys draft Special Needs Trusts, but do not have sufficient volume or sufficient experience to do a deep dive into the needs of the family of the child with special needs.
- Develop a Plan
As long as parents are living, they will be sure that their child with special needs is taken care of. The problem is after the parents are gone. Who will take care of the child or children? Where will they live? How will their needs be paid for? Do they work or could they work?
- Identify a Funding Source to Pay for the Standard of Living That You Want the Child to Attain.
Often, this means leaving your special needs child a larger share of your estate than your healthy children. In some instances, it may mean leaving all of your estate for your special needs child. Frequently, life insurance, especially second-to-die life insurance, is a good solution. A financial advisor with experience in dealing with families with special needs children can be invaluable.
If your special needs child has siblings, what role, if any, will they play in the life of your special needs child? What can they do to help? Realistically, will your special needs child be able to live with a sibling? If not, can the sibling work with a professional trustee to ensure that the special needs child achieves the standard of living that you desire.
What will your special needs child do for housing? Is it realistic to think they can live with a sibling? If not, can they live in a group home? If a group home makes sense, at what point should that be considered? There is a very long waiting list for group homes in New Jersey and most other states. When should an application be made for a group home? Often, this should be done before the parents become too old to care for the child at home.
- What Happens When My Child Turns 18?
When a special needs child turns 18, frequently he or she is eligible for SSI. If the child is incapacitated, guardianship should be considered. If the child has marginal capacity, perhaps a Supported Decision-Making Agreement will suffice, and a guardianship can be avoided.
- Public Benefits.
What public benefits are available to special need children? Frequently, these benefits include SSI, SSDI, Medicaid, Medicare, Group Homes, Federally Assisted Housing, Food Stamps (SNAP), Low Income Home Energy Assistance Program (LIHEAP), Division of Developmental Disability (DDD) services and many others.
- Community Resource.
Community resources, including disability organizations and government agencies, are available to assist the family of a child with disabilities.
- Estate Planning.
Parents of children with disabilities should implement an estate plan as early as possible. The estate plan would include a Will, a Living Trust (if appropriate), a Living Will, a Power of Attorney, and a Special Needs Trust. Estate planning for a child with disabilities who has capacity should also be considered. A simple Will, a Living Will, and a Power of Attorney are all useful. The Living Will and Power of Attorney can often be utilized to avoid guardianship.
- Family Discussion.
Once steps 1 through 9 have been completed, bring your circle of people who will provide assistance together to discuss the role that each is expected to play.