Estate Planning for Disabled Children and Relatives

November 25, 2011

Estate Planning for Disabled Children and Relatives

If you care for a child or other relative with a physical or developmental disability, you may frequently find yourself worrying about how your loved one will get by once you're gone. The good news is that by taking proactive steps now, you can ensure that your loved one enjoys a healthy and fulfilling life, even though you're no longer around to provide support.

Special Needs Trusts Are the Best Option

New York law provides for an estate planning mechanism called a "special needs trust" that is specifically tailored to serve the needs of individuals with physical or mental disabilities who require long-term care or social services.

Special needs trusts are the best estate planning tools for these individuals because they allow the individual to maintain eligibility for government benefits such as Medicare and Social Security disability. Special needs trusts are not designed to fully support the individual -- rather, they pay for the things government benefits won't, such as entertainment, travel expenses, group activities, transportation, payments for a nurse or other caregiver to accompany the disabled person while traveling, education or medical and dental expenses not covered by Medicare.

Everyone who cares for a disabled relative should consider a special needs trust, even wealthy families who don't think their loved one will ever have to rely on government benefits. You never know what might happen to your family assets after you're gone, and you don't want to take the risk of leaving your loved one unable to qualify for the benefits he or she needs. Further, the funds in special needs trusts are generally not subject to claims by creditors, which could help your loved one survive if the family trust becomes the target of a lawsuit.

It's also important to remember that all children become legal adults at age 18, even if they have disabilities that prevent them from making good decisions on their own. If you're worried about your loved one's ability to make decisions, you should make sure to appoint a guardian you trust. If you don't you run the risk of the court appointing someone you would not have chosen.

How to Fund a Special Needs Trust

Another helpful feature of special needs trusts is that they can be funded from a number of different sources. Many families choose to fund the trust with assets the loved one otherwise would have inherited, while others choose to purchase a special life insurance policy to fund the trust. Special needs trusts can also be funded by lawsuit settlements or gifts from friends and family.

It's important that the special needs trust is created correctly so your loved one's financial future and benefits eligibility are not jeopardized. If you are considering a special needs trust, it's best to seek the advice of an experienced estate planning attorney.

Article provided by Blustein, Shapiro, Rich & Barone, LLP
Visit us at http://www.mid-hudsonlaw.com