Who needs special needs planning? When a family includes an individual with an intellectual or developmental disability (IDD), sometimes referred to as a “person with special needs,” estate planning needs to address the complexities, as described in a recent article titled “Customize estate plan to account for disabled beneficiaries” from The News-Enterprise. Failing to do so can have life-long repercussions for the individual.
This often occurs because the testator, the person creating the estate plan, does not know the implications of failing to take the situation of the individual with special needs into consideration, or when there is no will.
The most common error is leaving the individual with special needs an outright inheritance. With a simple will, or no will, the beneficiary receives the inheritance and becomes ineligible for public benefits they may be receiving. The disruption can impact their medical care, housing, work and social programs. It may also lead to the loss of their inheritance.
If the individual with special needs does not currently receive benefits, it does not mean they will never need them. After the death of a parent, for instance, they may become completely reliant on public benefits. An inheritance will put them in jeopardy.
A second common error is naming the caregiver as the beneficiary, rather than the individual with special needs. This causes numerous problems. If designated as the beneficiary, the caregiver has the right to do whatever they want with the assets. If they no longer wish to care for the individual with special needs, they are under no legal obligation to do so.
If the caregiver has any liabilities of their own, or when the caregiver becomes incapacitated or dies, the assets intended for the individual with special needs will be subject to any estate taxes or creditors of the caregiver. If the caregiver has any children of their own, they will inherit the assets and not the individual with special needs.
The caregiver does not enjoy any kind of estate tax protection, so the estate may end up paying taxes on assets intended for the individual with special needs.
The third major planning mistake is using a will instead of a trust as the primary planning method. A Special Needs Trust is designed to benefit an individual with special needs to protect the assets and protect the individual’s public benefits. The trust assets can be used for continuity of care, while maintaining privacy for the individual and the family.
Planning for individuals with special needs requires great care, specifically for the testator and their beneficiaries. Families who appear to be similar on the outside may have very different needs, making a personalized estate plan vital to ensure that beneficiaries have the protection they deserve and need. It would be my pleasure to help you develop the Special Needs Trust for your family member- schedule a call today for a free consultation.
Reference: The News-Enterprise (March 15, 2022) “Customize estate plan to account for disabled beneficiaries”
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