When parents with special needs children pass away a carefully prepared estate plan could provide for the needs of the child and avoid the exclusion of government benefits.
This requires an estate plan that provides for the child's monetary needs in a way that does not disqualify the child from receiving government benefits. It also often requires creating an estate plan that provides those funds in a way that is fair to other children.
Recently, the Wall Street Journal discussed a couple of tools to accomplish these goals in "Estate Planning When You Have a Special-Needs Child."
The tools include:
- Supplemental Needs Trust – These trusts allow parents to leave assets for the care of a child with special needs, but leave those assets under the control of a trusted third-party who can make sure the assets are used appropriately and invested wisely. They also help prevent disqualification from receiving government benefits, which is often the result if a child with special needs is left a large inheritance in one lump-sum.
- Life Insurance – To fund a trust for a child with special needs, parents can take out life insurance policies and make the trust the beneficiaries of the policies. This allows the parents to divide their assets between all of their children equally while providing the extra funds for the child with special needs in a way that other children will not view as unfair.
An estate planning attorney could offer guidance in the options that work best for all family members.
Reference: Wall Street Journal (March 27, 2016) "Estate Planning When You Have a Special-Needs Child."