Estate Planning for Children with Special Needs
Parents who have children with special needs face a litany of challenges and decisions when putting together an estate plan, and the process can be overwhelming. However, when it comes to preparing an estate plan, there are two general categories of needs parents will want to consider: (1) caring for the child’s physical well-being; and (2) caring for the child’s financial well-being.
Part I. Caring for a Child’s Physical Well-Being
Depending on the needs of the child, there are several different mechanisms to assure a child with special needs is cared for if the parents pass away. Minor children, with or without special needs, will require that a guardian be appointed by the court to care for the child’s needs such as food, clothing and shelter. For adult children with special needs, a guardianship is the last resort and the most restrictive means of caring for a child, and alternatives to guardianships should be considered if the child has the capacity to appoint someone to make decisions regarding his or her care.
A. Appointing a Guardian
If a child is a minor, or if an adult child with special needs requires a legal guardian, parents will need to name a guardian for their child in the event of their deaths. The guardian is the person or persons responsible to ensure the well-being of their child. If the child is a minor, the guardian is usually the person with whom the child will reside if the parents pass away.
If a child is an adult, a guardianship is only needed if the child is unable to make his or her own decisions and meets the definition of legal incapacity. A guardianship for an adult child is a relationship created and monitored by a court that takes away the legal rights of an adult child who is incapacitated and gives those rights to another person. To establish a guardianship, the court must first find that the child is legally incapacitated. Legal incapacity means that the child, because of a physical or mental condition, is substantially unable to (1) provide for his or her own food, clothing, or shelter, or (2) care for his or her own physical health or to manage personal financial affairs. If the child is an adult, the guardian is the person who will make decisions about where the child resides, his or her personal care, and the medical care the child receives. Our special needs planning lawyer in Austin can help navigate this.
In choosing a guardian, parents of children with special needs must take into consideration a variety of factors that other parents do not often have to consider. Often, a child with special needs has an established support network where they reside that is central to the child’s well-being, including teachers, special education programs, educational supports, friends, social networks, therapists, and specialized medical providers. As a result, where the guardian lives can be a substantial factor when choosing a guardian for a child with special needs.
A guardian of a child with special needs may need to assist the child into and throughout adulthood, so the age of the guardian may play a significant role in determining the best guardian for a child. Another factor to consider is whether the guardian will have the time to devote to caring for the child with special needs. If the guardian works, will they be able to maintain their employment while caring for the child? Does the guardian have the ability to meet the physical and medical needs of the child? Will the guardian’s lifestyle accommodate raising a child with special needs? Does the guardian have adequate housing for minor children, or will the home need remodeling, an addition added, or other improvements to accommodate the child’s needs? All of these factors come into play when deciding upon a guardian, which oftentimes makes this one of the most difficult decisions for parents to reach. A special needs trust attorney can help navigate these difficult waters.
B. Alternatives to Guardianships for Adult Children with Special Needs
Many adult children with special needs can sign documents giving parents or other caregivers certain powers to assist the child with his or her physical or financial well-being without the need of establishing a guardianship through the court. A child can sign a medical power of attorney and a HIPAA release which will allow the parents to continue to speak with the child’s doctors and other medical professionals and to assist the child in making medical decisions after the child turns 18 without the need for a guardianship. These same documents can also designate a successor agent or agents to assist the child in making medical decisions if the parents are unable to do so, either due to death or disability. Successor agents are generally advised of their roles ahead of time so that they can quickly assist a child if a parent can no longer do so.
An adult child can also sign a financial power of attorney to appoint his or her parents to assist with asset management, bank accounts, or other financial matters, and these documents can likewise name successor agents to take over such functions if a parent can no longer assist the child. If an adult child receives social security, a representative payee can be appointed to manage these funds through the social security administration. An authorized representative can also be appointed to manage any state benefits such as food stamps, TANF, and Medicaid benefits without the need for a guardianship.
Parents may also authorize the trustee of a child’s special needs trust (discussed in Part II) to retain other persons or organizations to assist the child with certain needs or to encourage the child in developing his or her own unique talents. These can include case managers, therapists, house keepers, advocates, or other professionals who assist or provide services to individuals with special needs.
If you have any questions about guardianships or alternatives to guardianships, please contact our Austin special needs trust planning attorney and we would be happy to discuss your situation and assist you in developing a plan that fits with your family’s own unique situation.
Part II. Caring for the Child’s Financial Well-Being
In Part I of this blog, our Austin special needs trust planning attorney discussed planning for the physical care and well-being of a child with special needs. In Part II, our special needs trust attorney will be discussing caring for the financial well-being of a child with special needs. In addition to naming a person to take care of a child’s physical well-being, parents will also want to consider appointing one or more individuals or a trust company to manage a child’s inherited assets in the event the parents pass away. Often, this involves setting up a special needs trust for their child, setting up an ABLE account for the child, and using powers of attorney to give other trusted individuals the ability to assist the child with his or her own assets.
A. Special Needs Trusts
A special needs trust, also called a supplemental needs trust, is a trust set up to hold assets for the benefit of a person with special needs. In addition to ensuring a child’s inherited assets are properly managed and protected, one of the primary purposes of a special needs trust is to allow the child to qualify for means-tested governmental benefits, such as social security and Medicaid. The special needs trust can then be used to pay for other items which can greatly enhance the child’s life, such as specialized medical devices, access to technology, devices that can assist the child with communication, adaptive equipment, travel and entertainment, transportation, and other needs not covered by government or community programs. By ensuring a child can qualify for government services such as Medicaid to help pay for the child’s healthcare and other basic needs, the assets of the special needs trust can enhance a child’s quality of life and can help support the child for many more years than would otherwise be possible if the trust had to pay for these services.
It is often impossible for parents to envision who could feasibly take on the role they play in their child’s life should anything happen to them. Frequently, it may require a team of different people with different skill sets and areas of expertise to assist a child with his or her special needs after the death or disability of his or her parents. A special needs trust can grant powers to various individuals who will play a variety of roles in a child’s life, and along with a specialized estate plan, can provide the framework for this team of individuals to assure a child has a stable, fulfilling, and meaningful life.
B. ABLE Accounts
In order to qualify for means-tested governmental programs such as social security and Medicaid, a child cannot have more than $2,000 in countable resources at any given time. However, ABLE accounts allow an adult child with special needs who became disabled before age 26 to save up to $16,000 a year to pay for disability-related expenses without losing eligibility for means-tested government programs such as social security and Medicaid. When used as part of a comprehensive plan and in conjunction with a special needs trust, ABLE accounts can compound the resources and distributions available to an adult child with special needs and significantly add to the quality of his or her life.
ABLE accounts allow for tax-free earnings and withdrawals for disability related expenses and will not reduce a child’s eligibility for programs such as social security and Medicaid, even if used to pay for food and shelter. While other planning vehicles such as special needs trusts can never be directly controlled or accessed by a child with special needs, when appropriate, an adult child with special needs can control his or her own ABLE account and can even be issued a debit card to be used for expenditures. As a result, ABLE accounts are often used as an adult child’s “spending money,” to be used for buying meals when out with friends, shopping, going to the movies, paying rent or utilities, or buying groceries. These accounts allow a child to have much more independence, freedom, and a more fulfilling social life, significantly enhancing the child’s life.
ABLE accounts can also be controlled by an authorized representative who can make such expenditures on behalf of the child which adds a great deal more flexibility to a special needs plan. Distributions can be made from a special needs trust to an ABLE account that a caregiver or guardian can access without the need to go through a trustee which can be time-consuming and impractical for daily expenses. With an ABLE account, the child or his or her representative can access funds as needed, while the trustee of the special needs trust can manage larger expenditures thus making the process much more flexible and practical.
C. Managing the Adult Child’s Own Assets and Benefits
As discussed in Part I of this blog, an adult child with special needs can execute a financial power of attorney which gives parents the ability to assist the child in managing his or her own financial affairs. These powers of attorney can include successor agents who will take over these functions should the parents become incapacitated or die. Allowing the child to appoint his or her own agents pursuant to a power of attorney empowers the child rather than taking away his or her rights. If the child is receiving social security or other benefits, a representative can also be appointed to manage his or her benefits without the need for a guardianship. As a result, these alternatives should always be considered before filing for guardianship, as they allow the as adult child to maintain his or her dignity and support and encourage independence and self-reliance. Our Austin special needs trust planning attorneys will guide you step by step.
Planning for a child with special needs can be challenging, but our special needs trust planning attorneys are here to help. To schedule an individual consultation to discuss structuring a plan that meets the individual needs of you and your family, please contact our office and we would be happy to assist you.