● Including Your Special Needs Child in Your Estate Plan

By Melissa Gleick

October is Special Needs Law Month.  While the term “Special Needs Law” encompasses many sub-categories, one category of special needs law that our office encounters on a day to day basis is how parents of a special needs child should include that child in their estate plan.

Let me begin by saying, long gone are the days where parents should consider disinheriting this child just to ensure that the child will continue to receive any governmental or charitable benefits the child is receiving.  Through properly drafted estate planning documents, parents of a special needs child may leave that child an inheritance of any amount.

For example, we often use a third-party type of trust to hold the inheritance of the special needs child.  With this type of trust, the parent is the Grantor (the person contributing assets to and creating the trust) and often times the Trustee (the person managing the trust funds).  Any assets owned by the trust will be held for the benefit of the special needs child with distributions of income and principal to be made in the Trustee’s complete discretion without affecting any governmental benefits the child may be receiving.

In addition to the third-party type of trust mentioned in the previous paragraph, if the special needs child is under the age of sixty-five, we often ask parents to consider creating a first-party type of trust.  This trust is designed to “catch” any assets that the child receives directly, such as a gift or inheritance from a third party or a personal injury settlement, to prevent such assets from disrupting benefits eligibility.  Much like the third-party type of trust, the Trustee of this trust may make distributions to or for the benefit of the special needs child without affecting any governmental or charitable benefits the child may be receiving.  However, a first-party trust must reimburse the state for benefits the child receives during his/her life, and therefore is typically used only for assets that unavoidably end up in the child’s name.

Both trusts described above can easily be made part of your overall estate plan.  These trusts can also be established by a grandparent for a special needs grandchild.  If you or someone you know has a special needs child or grandchild, be sure to contact an estate planning attorney who specializes in special needs law to ensure that special needs loved ones are not unnecessarily disinherited or left assets in a way that will affect any governmental or charitable programs for which they would otherwise be eligible.

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