Providing for a Child with Special Needs in Your Estate Plan


Child with Special Needs

If you are the parent of a child with special needs, you likely want to provide financially for your child in your estate plan to ensure that your child is protected both during your lifetime and after you are gone.  Care must be taken when crafting your estate plan, however, to ensure that your child will benefit from the financial assistance you intend to provide. To help you get started, the Knoxville special needs planning attorneys at Stivers Law explain how to provide for a child with special needs in your estate plan.

Why Is Special Needs Planning Different than Traditional Estate Planning?

If you plan to leave assets to a child with special needs, regardless of the age of the child, you need to incorporate special needs planning into your estate plan because traditional estate planning can be problematic. Specifically, gifting assets directly to your child could do more harm than good. As an adult, your child with special needs may depend on state and federal assistance programs such as Medicaid, Medicare, or SSI. Those programs, however, typically have income and asset limits that cannot be exceeded by recipients. Gifting assets to someone with special needs, therefore, can result in disqualification for many of these much-needed programs. A special needs trust is frequently incorporated into a special needs planning component within an estate plan to solve this problem.

Third-Party Special Needs Trust

As the name implies, a third-party special needs trust is established by the third party with assets of the third party for the benefit of a person with special needs. This type of trust is most often established by a parent, or another family member, for the benefit of a child with special needs and uses assets of the parent, grandparent, or family member. This type of trust must include specific language and must be worded such that the assets in the trust are distributed to a third party, such as the parent, to be used for the benefit of the individual with special needs. Because the assets held in the trust are not available to the beneficiary, those assets do not disqualify the beneficiary from eligibility for assistance programs such as Medicaid and SSI. In fact, the idea behind this type of special needs trust, which is also referred to as a “supplemental needs” trust, is that the assets held in the trust will be used to “supplement” the benefits provided by the state and federal government. 

First Party Special Needs Trust

The other common type of special needs trust is a first-party, or self-settled, special needs trust. This type of special needs trust is established using the assets of the person with special needs.  It must be established by the parent, grandparent, guardian of the person with special needs, or by a court. Only the person with special needs can be the beneficiary of the trust.  This type of special needs trust is most frequently needed when a disabled individual receives a lump sum of money, such as the result of a settlement for injuries in a personal injury accident. The lump-sum would likely disqualify the beneficiary from eligibility for assistance from Medicaid, SSI, and other state and federal assistance programs. One of the other important differences between a third party and a first-party special needs trust is that with a first-party trust, any assets remaining in the trust upon the death of the beneficiary must be used to pay back Medicaid. With a third-party special needs trust, there is no need to worry about repaying Medicaid.

Contact Knoxville Special Needs Planning Attorneys

For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about special needs planning, contact the experienced Knoxville special needs planning attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.

Author Bio

Justin Stivers is the founder and managing attorney of Stivers Law, an estate planning firm specializing in wills, probate, trust administration, and financial risk management services. Justin’s approach goes beyond just creating legal documents. From aligning investments with estate plans to ensuring comprehensive insurance coverage, he safeguards a client’s legacy from unforeseen circumstances. His commitment extends beyond individual transactions, fostering lifelong partnerships to provide ongoing support and guidance.

With an impressive track record, Justin is licensed by the Florida and the Tennessee State Bars. His professional portfolio boasts Series 65 registration as a Registered Investment Advisor, the Wealth Management Specialist™ designation, and a 2-15 License for Health, Life, and Annuities. His dedication to excellence has earned him positions like Board Member of the Estate Planning Council of Greater Miami, Business Eagle Member of the Florida Justice Association, and active membership in esteemed organizations like the American Academy of Estate Planning Attorneys.

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