NOVEMBER 3, 2003 VOLUME 11, NUMBER 18
If your child has a disability you will have thought about what would happen on your death. Who will take care of your child? Who will pay for that care? Your estate plan can help address those concerns—and should probably include what most in the disability community call a “special needs” trust.
Government benefits can be crucial to the welfare of a child with disabilities. Supplemental Security Income (SSI), Medicaid (in Arizona, AHCCCS or ALTCS), Title XIX and Section 8 housing benefits—each program has its own eligibility rules, but most require that the recipient not have significant assets or income.
Some parents choose to simply disinherit a child with disabilities—not because they love the child any less, but because they fear the loss of those government benefits. At the same time, reliance on government programs leaves parents concerned about who can provide the personal oversight and involvement they bring to their child’s care while they are still able to do so.
Parents of children with disabilities should always consider establishing a trust for the child. A properly drafted trust can help supplement the minimum benefits provided by government programs, without displacing those programs altogether. In this way the parents’ assets can enhance their child’s life without being consumed by the high cost of care.
A special needs trust can provide funds for case management, advocacy, supplemental medical and dental care, therapies not covered by government benefits, companions and other care for the child with disabilities. It can also pay for education, travel, entertainment, visits from (or to) siblings, furniture, adaptive aids and other items that improve the quality of the child’s life.
The central rules governing a special needs trust are that payments should not be made for necessities such as food, clothing or shelter, and that cash distributions are usually not permitted. A carefully drafted trust can, however, permit the trustee to make even those disbursements at least on an occasional basis, and recognizing that there may be a temporary effect on government benefits programs.
One problem that remains is for the parents to select a suitable trustee. Siblings may be the best choice to handle the funds, though they will need special training in what kinds of investments and expenditures they should authorize.
Of course the same principles apply when the person with disabilities is not your child but a grandchild, niece, nephew or simply a family friend. It is essential in all such cases that any inheritance left to anyone who now receives or might later be eligible for government benefits be properly protected. The same can be said for life insurance and retirement benefits, as well.
At Fleming & Curti, PLC, we prepare special needs trusts for our Arizona clients. We also provide assistance and advice to trustees, so that they can protect government benefits while encouraging the independence and autonomy of beneficiaries with disabilities. We regularly counsel parents of children with disabilities, whether they currently receive government benefits or want to protect the possibility of future program eligibility.
For more information about the subject look at our Legal Q&A section on Special Needs Trusts. The Special Needs Alliance, a national affiliation of lawyers with expertise in special needs planning, also maintains a website with useful information and links to practitioners in nearly every state.