Redmond Office Law Blog

Families with a special needs child have additional planning to consider when setting up an estate plan. Special needs “traditionally refers to a child that at birth or due to a subsequent illness or injury is mentally, physically, or emotionally disabled and because of the severity of the disability may be eligible for needs based government benefits, such as Medicaid and Supplemental Security Income (SSI). A special needs child can include such individuals with Cerebral Palsy, Autism, Downs Syndrome and mental impairment.”

One of the recommendations that we make to families with a special needs child, besides setting up a Trust with provisions to protect the special needs child’s government benefits, is that the family put together a letter of intent for the Trustee. The letter basically serves as a blue print that is prepared by the parents and provides valuable information concerning the special needs child’s daily life, medications, care giver names, the dislikes and unique likes of the special needs child, along with as much medical information that is available. This information does not replace the need to also set up a third party Special Needs Trust.

A Third Party Special Needs Trust is a Trust with provisions that allow a third party, such as a parent or grandparent, to provide an inheritance for a special needs child without putting the child’s government benefits at risk. Traditional government benefits that can be put at risk include SSI and Medicaid, primarily because these benefits are need based. It is important that family members not leave an inheritance outright to a special needs beneficiary, but instead that the assets be left in a Trust. That allows a Trustee to give structured gifts, bequests and distributions to or for the benefit of the special needs child.

When dealing with a special needs trust it is also very important to choose your Trustee carefully. The Trustee will not only be responsible for making sure that the assets left to the special needs child are prudently invested, but the Trustee will also have the responsibility of making sure that when a distribution is made to or for the benefit of that beneficiary that it does not impact that child’s continued eligibility for government benefits such as SSI and Medicaid.

A current statistic states that, as of April 2004, 300,000 Michigan families with dependent children were on Medicaid. About 77,000 of those children are special needs children. It is estimated that nationwide there are 3.4 million families that one child with a disability.