Houston parents with special needs children can rely either on government programs or create a special needs trust to provide for the future of their children's care in their absence.
A special needs individual--one with an emotional, mental or physical disability, often caused by a condition developed at birth or during childhood--typically has medical and financial needs that differ from others. Family members are often wise to ensure their estate plan caters to the additional needs of a special needs individual.
Proper estate planning is essential if government programs are considered, as eligibility depends on the value of personal assets. Eligibility may be compromised by inheritance, gifts or child support. Government benefits include access to medical care and residential facilities that are not available through a private program. However, government programs do not cater to many daily care needs such as accommodation, education and medication.
A well-drafted special needs trust (SNT) can supplement government programs by covering those aspects not covered by government benefits. Therefore, the distribution of a SNT would not affect someone's eligibility for government benefits. However, it is not always necessary that a SNT adds on to a government sponsored program.
A first party SNT, created by a special needs individual's parent, grandparent, the court or legal guardian, allows the special needs beneficiary to allocate their assets tax-free to the SNT. The major advantage of the first party SNT is that the trust is not considered when looking at eligibility for Medicaid.
A third party SNT can be created either in place or in addition to a first party SNT. The assets in the third party SNT are of someone other than the person with special needs. Other family members can also add gifts to the trust without compromising government programs eligibility. Therefore, the trust can benefit special needs children and other children.
A life insurance policy can also be used to fund a SNT but beneficiaries should be designated carefully.
Houston residents considering creating a SNT should remember to plan their gifts in advance and re-title their assets to ensure their SNT does not interfere with government programs. A well thought out estate plan is essential to ensure a special needs individual's rights are protected in the long run.
Source: LifeHealthPro, "Planning for special needs," Lina Storm, May 31, 2012
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