elderly couple thinking about estate planning

Estate Planning For A Relative With Special Needs

Estate planning is a challenge, especially when done on behalf of a child or other relative with special needs. There are different considerations involved and therefore different objectives compared to standard estate planning. If you have a child or loved one with a disability or mental limitation, you should consider working with an attorney who has experience in this particular practice area.

Children and family members with special needs often qualify for government assistance programs. These benefits provide vital financial support and services for children and adults with special needs. However, the amount of money paid out by these programs is severely limited. In addition, receiving an inheritance could put the child or adult at risk of losing his or her eligibility for these benefits. This can destabilize housing or other supports by disqualifying the person for services.  

Parents’ assets are usually not considered when a child (or someone on his or her behalf) applies for public benefits. But when a child becomes an adult, any assets owned in their own name could potentially bar him or her from qualifying for such programs. Gifts and inheritances can therefore disqualify an otherwise eligible special needs adult from such programs as: 

  • MassHealth 
  • Medicaid 
  • Supplemental Security Income (SSI) 
  • Food stamp benefits 
  • Housing subsidies 

Some parents may consider disinheriting the child, which ensures continued eligibility for benefits when the child becomes an adult. But this is problematic for two reasons. First, it denies the child supplemental income he or she may need. Public benefits are helpful but rarely meet the total expenses incurred by special needs children and adults. Secondly, doing this makes the child or adult entirely dependent on government programs for survival. There’s no guarantee that eligibility criteria will remain the same or that funding will remain stable or increase.  

One of the best solutions to this conundrum is a special needs trust. When drafted and executed correctly, a special needs trust can provide funds for a child while maintaining his or her eligibility for public assistance. Special needs trusts hold assets on behalf of someone with a mental or physical condition that limits their ability to provide for themselves. Homes, vehicles, and other assets can be placed in the trust. Assets or property transferred into the trust won’t count against the relative’s ability to obtain public benefits. 

The terms of the trust must be carefully drafted to ensure compliance with the law and continued qualification for benefits. For instance, they should state that assets therein will be used to pay for supplemental benefits and services, including: 

  • Personal care attendants 
  • Physical rehabilitation 
  • Out-of-pocket medical and dental expenses 
  • Medications not paid for by medical benefits 
  • Special dietary needs 
  • Insurance 
  • Educational and recreational activities

Along with special needs trusts, your attorney may discuss such options as: 

Guardianship. You may want to obtain a guardianship to care for a special needs child or relative. Guardianships allow a guardian to make certain decisions for the incapacitated person and can be limited to specific purposes, such as making educational decisions. 

Conservatorship. You may want to obtain a conservatorship to allow another person to manage finances and make financial decisions on behalf of the incapacitated person.  

ABLE accounts. These special tax-advantaged savings accounts allow for contributions of up to $16,000 annually (adjusted periodically) from multiple people. Accountholders can also contribute earned income up to a certain limit. The money can be used for any purposes related to the disability, and do not disqualify the individual from Medicaid. 

If you’re prepared to take the next step and begin drawing up an estate plan for a loved one with special needs, you can connect with our Estates & Trusts team to explore your options regarding special needs trusts and alternative solutions.