Everyone benefits from having a comprehensive estate plan regardless of family make-up or estate size. But for some families with children who have special needs, establishing a well thought out estate plan is crucial and usually necessary to ensure proper care continues to be provided to those children after the parents are gone.

Special needs planning focuses on one or more of the following areas:

Transition Planning:

When a child with special needs turns 14, their parents may want to begin considering what that child’s life will look like once they have completed school. Planning ahead allows the parents time to set up a plan to transition their child into an adulthood that will allow for as much independence as possible.
More specifically, the child’s Individualized Education Pan (IEP) should begin addressing the academic, social, and life skills that will be needed to become more independent. These considerations may include thinking about living arrangements or career options.

Guardianship Planning

When a child reaches the age of majority (18 years in California), parents lose legal decision-making authority over that child on all fronts (health, education, finance, living situation) unless a court decides that that child is not capable of making some or all of those decisions and appoints a limited conservator (usually the parents). This means that when a special needs child turns 18, parents will not be able to access that child’s health records or take an active role in IEP meetings unless the taken legal action.

Sometimes the adult child with special needs has legal decision-making capacity. If this is the case, a limited conservatorship is not appropriate, and that child will need to execute their own estate plan in order to appoint others (usually the parents) to help them make decisions. This may include an advance health care directive appointing health care directive and a durable power of attorney for finance.Sometimes guardianship planning is necessary because the parents who have been caring for an adult child with special needs are becoming ill themselves and are no longer able act as legal decision-makers for that child.

Government Benefits

Once a child turns 18, eligibility for government benefits is based on his/her/their own income and assets. It is important to consider when government benefits are needed to help care for a child or other family member with special needs and to plan accordingly.
Many government benefits programs have income and asset limits that contribute to determining eligibility to receive the benefit. Receiving an outright sum of money or inheritance may jeopardize that child’s government benefits. However, specialized estate planning by the person making the gift usually prevents ineligibility for benefits while allowing the special needs child to benefit from the inheritance.

Estate Planning and Special Needs Trusts

What is a special needs trust? A special needs trust (SNT) is a trust that may be set up and funded for the lifetime benefit of a disabled beneficiary. SNTs should be drafted by a qualified attorney because there are specific trust provisions that must be included in the trust document in order to qualify the trust for SNT status under both state and federal law.

How are SNTs Funded? SNTs may be funded with the disabled beneficiary’s own assets (called a “first-party SNT”) or with another person’s assets (called a “third-party SNT”).

A first party SNT may only be set up by a disabled beneficiary under 65 years old. The trust must be irrevocable (unchangeable) and for the sole benefit of the disabled beneficiary. When the disabled beneficiary dies, the remaining trust assets must be used to reimburse Medi-Cal (called Medicaid outside of California) before they can be distributed to trust remainder beneficiaries. First party SNTs are typically funded to preserve a disabled beneficiary’s inheritance or his/her/their proceeds from a lawsuit.

A third party SNT may be set up by anyone other than the disabled beneficiary for the benefit of the disabled beneficiary, and must be funded with assets that are owned by someone other than the disabled beneficiary. For example, parents may set up a third party SNT for their disabled child, funded with the parents’ assets either while they are living or once the parents have died. Unlike first party SNTs, third party SNTs may be set up for the disabled beneficiary at any age and the trust assets remaining at the disabled beneficiary’s death do not have to be reimbursed to Medi-Cal. Instead, the trust assets remaining at the disabled beneficiary’s death may be distributed to other family members such as the parents’ other children.