23 June 2018

Estate Planning With A Special-Needs Child

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A child with special needs can pose a complex challenge when it comes to estate planning. If the child is expected to require special care and financial help through adulthood, this is likely to affect how guardians divide up their assets among heirs.

To avoid missteps, parents and grandparents in this situation need to understand their options. A supplemental-needs trust, for example, is one of the most useful tools for people seeking to pass on funds to a child in need of lifelong support for a disability.

Although the trust earmarks assets for the benefit of the inheritor, it keeps them under the management and control of assigned trustees (typically the family members who will care for the child after the guardian’s death). This arrangement can be crucial if the child receives Medicaid or other government benefits related to the disability. Since these benefits often depend on a person’s assets and income level, an individual may suddenly not qualify for benefits if he or she receives a large inheritance one year. Using a supplemental trust instead of transferring assets to the child outright can help prevent that.

Life insurance also can help simplify estate planning for those struggling to divide up assets fairly when one heir is going to need more financial support than the others. For example, parents can leave an equal portion of their estate to each of their children, but then assign a life-insurance award to the supplemental-needs trust of the child with the disability. This can alleviate anxiety about fairness by casting the financial outlook of the child with special needs as a separate matter that is addressed by a separate means.

Click here to read the original article by Henry Klosowski in the Wall Street Journal.

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