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Critical Information For All Parents of Children With Disabilities

This Article is written by Tulsa Estate Planning Attorney, Breanna Grove

One often overlooked area of estate planning is planning for individuals with disabilities.  However, this is a very critical area in which failing to plan can have devastating results such as loss of Medicaid, Social Security, or other income based governmental assistance programs that are essential for the lifelong care of individuals with disabilities.  Setting up a Special Needs Trust can help ensure that an individual with disabilities does not become disqualified from receiving their government benefits.  Special Needs Trusts also help the disabled individual to  have access to resources to pay for treatment or therapies that might not be covered by Medicaid or simply to provide comforts to increase their quality of life without compromising their eligibility for government resources.

If you have a child with a disability and you have private insurance, you might not see the importance of planning at this moment.  However, let me give you a couple of examples of why setting up a Special Needs Trust right now is very important.

Example 1:  Robert is 19 and has Down’s Syndrome.  He has been working for his parent’s business since he was 13.  Instead of paying Robert directly, his parents invested money into a Roth IRA for his benefit.   His parents thought they were doing the best thing for Robert.  However, because Robert owns more than $2,000 in assets he fails to qualify for public assistance.  Robert is forced to spend down his Roth IRAs and pay penalties.  Then, Robert is subject to a look back period of 36-60 months to determine whether a “transfer for purposes of benefit qualification” was made.  If so, he could be ineligible for public benefits for a set amount of time or until he pays a certain amount of money for his own care depending on the particular program at issue.

Example 2:   Sam and Rita have a 5 year old, Rachel who has Autism.  Sam and Rita did not do any type of estate planning.  Sam and Rita are involved in an accident and both are killed.   Rachel does not have a guardian and might be placed in DHS care until a proper guardian can be determined by the Court.  This would likely be a very traumatic experience for her.  Additionally,  Sam and Rita’s estate will have to be probated which could tie up money needed to support Rachel.   Rachel will likely inherit their entire estate after all expenses and creditors have been paid.   However,  since she is a minor the probate Court will set up a Trust for her benefit that will pay her the entire amount at 18 .  Even if the probate court allows a special needs trust to be set up after her parents death, it will be considered self funded and Rachel’s estate will likely be required to pay back various public assistance programs with any money remaining in the trust after her death.  Finally, her inheritance might make her ineligible for some assistance programs now or after she reaches 18 and receives her inheritance.

Additional reason for creating a Special Needs Trust before your child reaches 18 are:

1) Estate Planning – Having everything taken care of in case something happens to you as parents gives your family members who would likely step in as guardianships or a Trustee a clear plan.  It also saves them the burden of having to figure out all of these critical decisions at what would likely be a very emotional and stressful time.

2) Third Party Funding – It is much more beneficial for parents or other 3rd parties to fund the Special Needs Trust.  A self funded trust will likely be subject to look back periods and payback requirements.

3) Gifts or Inheritances – If a child receives any gifts or inheritances it can be placed in the Special Needs Trust.  This will insure that the gifts or inheritances are properly managed for the child and that the child will not own assets that may cause them to be disqualified from public assistance programs when they are older.

4) Life Insurance – Life insurance can be a very important tool in long term planning for a child with disabilities.  The Special Needs Trust can be listed as the beneficiary of the life insurance policy and can help manage the policy.  Additionally, minors can not be listed as beneficiaries of a life insurance policy which creates additional issues that are resolved by having the Special Needs Trust listed as the beneficiary.

Planning early is critical and can help ensure that your child’s needs will be met and that they will not become disqualified from public assistance programs.  Even if you do not plan on funding the Trust until after your child turns 18 or until after your lifetime, having something in place is a very good idea.

For more information please feel free to give us a call!  Grove Legal Services, PLLC 918-899-7949 or visit our web site

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