Planning for parents of a special needs child often requires a unique blend special considerations. Parents must plan and save for their own retirement while considering the impact of their decisions on their special needs child and their other children. Most importantly, parents must plan for what will happen to their special needs child when they are no longer able to care for them. The US Census estimates that 54 million people or about 19% of the population, suffer disabilities.

Although the particular facts and circumstances of each family is different, a special needs trust is often the best alternative when planning for a developmentally disabled child. This is especially true if they are or may become eligible for public benefits such as Supplemental Security Income (SSI), Medicaid and various state assistance programs. When establishing the terms of a special needs trust (SNT), preserving public benefits eligibility is critical. Because these programs are typically "means tested" which requires individuals to demonstrate the financial inablility to be able to pay for these benefits. Therefore if money is to be left in trust to a special needs child, it is critical to have the trust properly drafted to preserve these "means tested" programs to help pay for basic health and living expenses.

In 1965 Congress created the Medicaid system as Title 19 of the Social Security Act. Title 19 is a federal and state partnership whereby states are provided broad federal guidelines for administering the program but do have some discretion when determining eligibility and program maintenance. In Connecticut an individual is not eligible for nursing home benefits under Medicaid until they have no more than $1,600 in assets in their own name and an income of not more than $2022 per month. Consequently, it is important for parents to understand that it is not a good idea to name their special needs child a beneficiary of any assets that would put him or her over that figure. Proceeds from the parents' life insurance, 401(k) and 403(b) accounts, real estate, annuities, and many other assets may be placed in a special needs trust. In addition to parents, legal guardians, grandparents and also third parties may create these trusts.

If a Special Needs Trust becomes the named beneficiary of life insurance, employee benefit plans, or other assets, the trust agreement contains instructions to on the trustee how to manage, accumulate, and disburse money for the benefit of the child to enhance his or her life. If the special needs trust is properly structured it will not affect the government benefits that the child receives.

For example, assume that Jim and Cathy are married and have two children: Molly, age 19 is in college and Paul, age 16 who was born with developmental disabilities. They own their home with a fair market value of $350,000 and subject to a $200,000 mortgage, vehicles valued at $35,000, and a $250,000 term life insurance policy on Jim and none on Cathy. The combined gross income for the couple is $105,000. Both Jim and Cathy have 401(k) plans through their employers and own stocks and bonds worth $75,000. By most standards, this couple certainly is not wealthy so does estate planning in this context make sense for them? I think that most attorneys would agree that it is critical this couple plan their estates to provide for their special needs son.

Assume that Jim and Cathy decide to see an Elder Law/Special Needs Attorney and establish a Special Needs Trust. Assuming that their special needs son Paul now qualifies for SSI and Medicaid, upon his parents' death, his portion of their inheritance went into the Special Needs Trust instead of outright to Paul, he does not lose his government benefits. The Trustee of the Special Needs Trust may also be in a position to pay for items not covered by these various programs such as vocational training, facilitative technologies, and travel expenses including vacations. Rules and restrictions will vary by state so parents and or guardians should check with a qualified attorney in their state.

A Special Needs Trust works best when integrated into the parents' overall estate plan. Ideally the wills should direct which funds will be used to fund the trust. This trust can be established during the parents' lives and can be funded by the provisions in the will, along with other assets that can be contributed by others, such as grandparents.

Parents need to also consider appointing a guardian for their special needs child to manage his or her day-to-day care when they can no longer do so. The guardian may be the same person chosen to be trustee, but parents should also consider including as many loving people as possible in the care of their loved one.

Finally, parents are encouraged to consider preparing what is often referred to as a "letter of intent" describing their wishes for their special needs child. While this "letter of intent" is not a legal document, it can be very helpful in guiding the trustee or surviving family in caring for the need of this child's in conformity to what the parents hoped for. By choosing the guardian and trustee carefully, most will do their best to follow the parents' wishes as expressed in this "letter of intent".

Planning for a special needs child can be a complex and confusing process. For a family faced with this situation, I recommend they locate an attorney who specializes in special needs issues and can work well with their financial or tax advisors to help them develop the appropriate estate plan.