Planning for a Child with Special Needs
We all face challenges in life. But, objectively speaking, some of us have it harder than others. You want the best for your child and you do your best to ensure that your child is secure and taken care of during your life. But what happens to your child when you are gone?
Potential Benefit Programs for Special Needs ChildrenThere are four main programs that a special needs child could receive benefits from. They are: Medicare, Medicaid (Medi-Cal in California), Supplemental Security Income (SSI), and Social Security Disability Income (SSDI). It's possible that a special needs child could receive benefits from all four of these programs. Or, none at all. But it's important to know what your special needs child is receiving since each of these public benefits has different eligibility rules and different sets of covered services. For example, SSDI and Medicare are not based on financial need, and SSI and Medicaid have strict financial requirements. Now, this is important because you want to provide for your child should you die or become disabled. But your best intentions could prove disastrous for your special needs child who is relying on government assistance. The same applies for well-intentioned family members who want to help out your child.
Four Options We Do NOT Recommend1. Distribute your assets outright to your special needs child, which could disqualify them from eligibility for Medicaid and SSI; Or 2. Disinherit your special needs child. But your beneficiary will have no safety net should government benefits be subsequently reduced or eliminated; Or 3. Leave your assets/property to another family member with "understanding" that the property is meant for your special needs child. However, this property would be subject to your family member's creditors and even their ex-spouse; Or 4. Ignore the situation. Your special needs child could then set up a first-party special needs trust (SNT). But assets received from Medicaid would be subject to payback; Or, finally
Recommended Option: Establish a third-party SNTThird-party SNTs are funded with assets that do not belong to the beneficiary. Third-party SNTs are not subject to the numerous restrictions and limitations of a first-party SNT, other than that the beneficiary must not be able to revoke or terminate the SNT, nor have the legal authority to direct the use of the SNT assets for his support and maintenance. A third-party SNT will not disqualify the special needs beneficiary from receiving any means-tested government benefits, such as Medicaid and SSI, for which the beneficiary would otherwise be eligible as a result of his disabilities. At Zapf Estate Planners, we think there is only one realistic option. Obviously, there is much more to discuss, and we are happy to do so with you.