Special Needs Planning – What you should know

Posted on May 10, 2017 in From Our Team- Blog

The author of this article, Frank S. Hennessey is a long-time member of the Board of Directors of PLAN of PA and the Co-Founder of Premier Planning Group.
What Do You Need to Know About Special Needs Planning?

Special Needs Planning is a support to families who have family members with special needs. There are multiple laws, requirements, and regulations which must be understood and reviewed in reference to the specific concerns of each individual within the context of his/her unique family dynamics.

Proper planning is intended to assure that the person is provided for once his parents/caregivers become disabled or die. This service is not only beneficial for a minor or an adult child, but also for dependent parents or other relatives. The abilities and challenges of the individual in need determine the required level (and cost) of care. Each situation is unique and must be planned for on an individual basis.

Even when other members of the family are willing to assume caregiver duties, it is still important to provide for asset management. Either a testamentary or living trust can serve this need. Such a trust, sometimes called a “supplemental needs trust,” should: (1) appoint a steward of the person’s property and money; (2) select a guardian; (3) set out instructions on how the person should be cared for; (4) ensure, to the extent possible, that the person will not lose payments or benefits from government agencies; (5)integrate the rust with the remainder of the parent’s estate plan (e.g., achieve equity among family members).

Often family dynamics are a significant consideration. Survivorship life insurance on both parents frequently provides a cost-efficient means of funding a trust upon the deaths of both parents. Individual insurance on the primary caregiver may be more appropriate when one parent provides most of the care. Disability income insurance on a working parent should also be considered.

During the course of his/her lifetime, a disabled person may be eligible for Social Security Disability Income (SSD), Supplemental Security Income (SSI), Medicare, and Medicaid. A Special Needs Trust is intended to supplement, not replace, these government programs.

Eligibility for government assistance can be negatively affected by the disabled child’s assets (e.g., a single disabled person with SSI benefits cannot own more than $2K in cash and liquid assets). Even when a trust consists of third party assets, the discretionary powers of the trustee must be carefully limited. Without tight fiduciary control, assets may be viewed as “available” to the person even within a Special Needs Trust. However, the federal Medicaid statute ensures that a trust established with the assets of a third party, such as a parent, is not considered “available” to the trust beneficiary.

Special Needs Planning may also affect other estate planning techniques. For example, ‘Crummey Withdrawal Power’ allows a person to receive a gift that would other wise be ineligible for gift-tax exclusion, and change it into one that is eligible. However, under federal law, a Medicaid recipient cannot refuse a gift. These two regulations generally mean that a disabled child should not be given Crummey Withdrawal Powers, since his failure to make a withdrawal could jeopardize his Medicaid eligibility.

These concerns are only some of the dynamics and considerations discussed and weighed between a family and their Special Needs Planner.  The Family—Planner relationship should be based in your own ability to talk to your planner and your confidence that she or he understands: (1) the unique realities in the person with special needs’ life; (2) within the context of your family dynamics; (3) as well as the knowledge this person possesses about regulations, requirements and laws surrounding Special Needs Planning.