9 Critical Mistakes When Planning For A Special Needs Child
MISTAKE # 1: DISINHERITING THE CHILD Many disabled people rely on government benefits to provide food and shelter.
If you have been advised to disinherit your disabled child, remember that these public benefits provide no more than "bare bones" basic necessities.
Consider establishing a Special Needs Trust to provide for quality of life expenses without interfering with eligibility for public benefits.
MISTAKE # 2: PROCRASTINATING No one knows when they may die or become incapacitated.
Planning ahead for your special needs child is especially important.
Your special needs child may never be able to make up for your failure to plan.
Other children without special needs can work once they've reached adulthood.
Your special needs child, on the other hand, may not have that chance.
A Special Needs Trust should be put in place NOW to protect your special needs child.
MISTAKE #3: RELYING ON YOUR OTHER CHILDREN Many people rely on their other children to provide for a special needs sibling from their own inheritances.
Siblings of a special needs child often feel responsible for that child.
But, what if the child with the money gets divorced? What if the child with the money dies or becomes incapacitated? What if the child with the money is sued? A Special Needs Trust provides assets specifically allocated to your special needs child with clear instructions to your other children.
This can lessen the burden on all your children and can encourage a loving and involved relationship between them.
MISTAKE # 4: NOT PROTECTING A SPECIAL NEEDS CHILD FROM PREDATORS Predators are particularly attracted to people who are vulnerable, such as the young and those with limited capacity.
An inheritance through a Last Will and Testament is part of the public record.
By using a Special Needs Trust, parents can control who has access to the information about a special needs child's inheritance.
The privacy of a trust can help protect your child and other family members, who may be serving as trustees, from predators.
MISTAKE # 5: POORLY DRAFTED TRUST DOCUMENT A Special Needs Trust must be designed properly to promote the quality of life for a special needs child without causing that child to be ineligible for public benefits.
The State can deny coverage for essential services if the assets in the trust are considered "available" to the special needs child.
The trust agreement must be structured as a "spendthrift" or "discretionary" trust.
A "spendthrift" or "discretionary" trust gives the Trustee the authority to determine whether or not to make any distributions without limitation.
MISTAKE # 6: NOT INVITING CONTRIBUTIONS FROM OTHERS An important benefit of creating the Special Needs Trust now is that family and friends can add to the trust.
This can be done either through lifetime gifts or through their Last Will and Testament.
Some of the options available are naming the trust to be the beneficiary of life insurance policies, annuities or retirement plans.
MISTAKE # 7: CHOOSING THE WRONG TRUSTEE During your life, you and your spouse will most likely manage the Special Needs Trust.
When you and your spouse are no longer able to serve as Trustee, you can choose who will serve as Successor Trustee.
You can choose an individual to act as Trustee or you can choose a team of Trustees.
For example, you might select a family member as the "distribution" trustee and a professional or institutional trustee as the "administrative" trustee.
Also, you can name an Investment Advisor to guide the trustee in making investment choices or a Trust Protector to replace a Trustee who is not taking good care of your special needs child.
MISTAKE # 8: FAILING TO PROPERLY "FUND" THE TRUST A Special Needs Trust without assets will be useless to your special needs child.
Any asset you wish to put into the trust requires a change in the title or ownership of that asset.
For example, if you want life insurance or retirement plans to pay into the trust when you die, you must be sure you've completed the proper beneficiary designation forms.
Or, if you want real estate to be put into the trust, a deed must be executed and recorded MISTAKE #9: UNNECESSARY "PAY-BACK" PROVISIONS A common mistake is having a "pay-back" provision in a Special Needs Trust when it's not required.
These "payback" provisions, where the State recovers the money spent on the special needs child, are only required when assets of that special needs child are used to fund the trust.
If the money in the trust is all from "third parties", whatever is left over in the trust can go to other beneficiaries when the special needs child passes away.
For a free copy of "Special Futures: A Common-Sense Guide to Special Needs Planning" contact me at (203) 488-5586 or mark@markconnellattorney.
com.
If you have been advised to disinherit your disabled child, remember that these public benefits provide no more than "bare bones" basic necessities.
Consider establishing a Special Needs Trust to provide for quality of life expenses without interfering with eligibility for public benefits.
MISTAKE # 2: PROCRASTINATING No one knows when they may die or become incapacitated.
Planning ahead for your special needs child is especially important.
Your special needs child may never be able to make up for your failure to plan.
Other children without special needs can work once they've reached adulthood.
Your special needs child, on the other hand, may not have that chance.
A Special Needs Trust should be put in place NOW to protect your special needs child.
MISTAKE #3: RELYING ON YOUR OTHER CHILDREN Many people rely on their other children to provide for a special needs sibling from their own inheritances.
Siblings of a special needs child often feel responsible for that child.
But, what if the child with the money gets divorced? What if the child with the money dies or becomes incapacitated? What if the child with the money is sued? A Special Needs Trust provides assets specifically allocated to your special needs child with clear instructions to your other children.
This can lessen the burden on all your children and can encourage a loving and involved relationship between them.
MISTAKE # 4: NOT PROTECTING A SPECIAL NEEDS CHILD FROM PREDATORS Predators are particularly attracted to people who are vulnerable, such as the young and those with limited capacity.
An inheritance through a Last Will and Testament is part of the public record.
By using a Special Needs Trust, parents can control who has access to the information about a special needs child's inheritance.
The privacy of a trust can help protect your child and other family members, who may be serving as trustees, from predators.
MISTAKE # 5: POORLY DRAFTED TRUST DOCUMENT A Special Needs Trust must be designed properly to promote the quality of life for a special needs child without causing that child to be ineligible for public benefits.
The State can deny coverage for essential services if the assets in the trust are considered "available" to the special needs child.
The trust agreement must be structured as a "spendthrift" or "discretionary" trust.
A "spendthrift" or "discretionary" trust gives the Trustee the authority to determine whether or not to make any distributions without limitation.
MISTAKE # 6: NOT INVITING CONTRIBUTIONS FROM OTHERS An important benefit of creating the Special Needs Trust now is that family and friends can add to the trust.
This can be done either through lifetime gifts or through their Last Will and Testament.
Some of the options available are naming the trust to be the beneficiary of life insurance policies, annuities or retirement plans.
MISTAKE # 7: CHOOSING THE WRONG TRUSTEE During your life, you and your spouse will most likely manage the Special Needs Trust.
When you and your spouse are no longer able to serve as Trustee, you can choose who will serve as Successor Trustee.
You can choose an individual to act as Trustee or you can choose a team of Trustees.
For example, you might select a family member as the "distribution" trustee and a professional or institutional trustee as the "administrative" trustee.
Also, you can name an Investment Advisor to guide the trustee in making investment choices or a Trust Protector to replace a Trustee who is not taking good care of your special needs child.
MISTAKE # 8: FAILING TO PROPERLY "FUND" THE TRUST A Special Needs Trust without assets will be useless to your special needs child.
Any asset you wish to put into the trust requires a change in the title or ownership of that asset.
For example, if you want life insurance or retirement plans to pay into the trust when you die, you must be sure you've completed the proper beneficiary designation forms.
Or, if you want real estate to be put into the trust, a deed must be executed and recorded MISTAKE #9: UNNECESSARY "PAY-BACK" PROVISIONS A common mistake is having a "pay-back" provision in a Special Needs Trust when it's not required.
These "payback" provisions, where the State recovers the money spent on the special needs child, are only required when assets of that special needs child are used to fund the trust.
If the money in the trust is all from "third parties", whatever is left over in the trust can go to other beneficiaries when the special needs child passes away.
For a free copy of "Special Futures: A Common-Sense Guide to Special Needs Planning" contact me at (203) 488-5586 or mark@markconnellattorney.
com.
