Special Plans for Your Special People

By: Katie E. Finnell

Lily is a beautiful, active, and full of personality toddler who happens to have Down Syndrome. Lily’s parents and I have been friends for years and I have the continuing pleasure of watching Lily and her siblings grow up.  While Lily is becoming a physical-therapy rockstar and hitting all her milestones in a timely fashion, her parents have started planning for the future.

Special Needs Planning typically involves creating a Special Needs Trust or designating the ability to create a Special Needs Trust in the future (see below).

These trusts are established by placing funds or other assets under the control of a trustee who will use the funds for the benefit of the Special Needs individual without disqualifying the person from government benefits such as Supplemental Security Income (SSI) and Medicaid.  Life insurance can be used to fund or add to the trust in the future.  It is extremely important that the language in the trust is written correctly to comply with the restrictions and requirements set forth by the law.  It is also important to remember that the funds in the Special Needs Trust are to supplement, not supplant, the government benefits. These funds are strictly used to provide financial assistance for any care above and beyond what the government provides. 

Lily is very young, but her parents and I have already had a conversation about what her care might look like in the future.  If Lily develops the ability to understand her finances and can provide for her own health care needs, she may be able to appoint a Power-of-Attorney when she turns 18.  This would allow whoever she appoints, typically her parents, to assist her with her finances, if necessary, and be involved in her medical care when needed.  If Lily does not develop an understanding of finances, health care, or have the ability to care for herself, she would lack the capacity to appoint a Power-of-Attorney.  She will, however, still need assistance in these areas. Someone, typically a parent, would petition the court to be appointed guardian of Lily in order to legally be allowed to make decisions for Lily. 

Lily’s parents are also planning for their other children.  While none of them currently have any medical issues, there is no way to predict the future.  This is where their Last Will and Testament comes into play.  As most couples do, their Wills list each other as the primary beneficiary of their estate and list all the children as the secondary beneficiaries if something happens to both of them. In order to protect the interests of all the children, they have listed several other family members as guardians of the children.  Additionally, their Wills have Special Needs Trust trigger language in them.  This means that the Will directs (“triggers”) the disabled beneficiary’s inherited funds to a Special Needs Trust if beneficiaries qualifies for SSI or Medicaid at the time of the inheritance.  (This trigger also applies if the beneficiary is a disabled surviving spouse.)  If none of the beneficiaries of the estate are special needs, the trigger language is not applied.  Without the Special Needs language in the Will, the funds automatically get distributed to the beneficiaries.  Having the Special Needs language in the Will and not need it is much more desirable than needing the language and not have it.  

In developing a plan, it is important to work with an attorney experienced in special needs planning and familiar with the governmental agencies providing the benefits.  A clear understanding of how a person’s income and assets effects his or her Supplemental Security Income and Medicaid benefits is crucial to prevent the disruption or termination of benefits.

Learn more about estate planning and special needs.