Five Tips to protect Your Child with Special Needs

Protecting a child with special needs may lead families to make common mistakes. Here are a few examples:

1. Custodial Accounts. Commonly, there are custodial accounts in the name of a child with special needs. Such an account, however, will affect the child’s availability for government assistance. Custodial accounts are often established long before the child’s special needs are recognized. If the account has an excess of $2,000.00, parents must deplete any such accounts for the care of their child to qualify for Medicaid assistance or allocate the assets to a pooled trust or first party special needs trust. If parents choose to provide assets to or for the benefit of that special needs child, a special needs trust may be established by parents or other family members and gifts can be made directly to this trust account.

2. 529 Plan. There also may be a 529 Plan in the name of a special needs child. This account in the child’s name may affect the child’s ability to receive government assistance. The 529 plan is considered an available asset of the child’s when determining his or her eligibility following the death of the individual who established the plan for such child. The best solution would be to change the designated beneficiary under the 529 Plan to name another child, if that is an option.

3. Retirement Plan and Insurance Policy Beneficiaries. Often times, parents may have worked to develop a special needs trust to which their estate plan is tied, however they forget one critical issue. Life insurance policies and retirement plan accounts pay to designated beneficiaries and do not pass under an individual’s Will. It is vital that parents tie these assets with the special needs trust. If a life insurance policy or retirement plan account are paid directly to a special needs child, the receipt of the assets will affect the child’s ability to receive government assistance.

4. Extended Family conference. Although talking with extended family members eager to benefit a special needs child may be awkward and difficult, the discussion is important. Well intentioned grandparents may allocate a portion of their estate to the special needs grandchild to make sure there are monies available to benefit their special needs grandchild and while intentions are good, the receipt of these monies could affect the grandchild’s ability to receive government benefits. Alternatively, a grandparent’s Will could leave assets to his or her children and if a child predeceases him or her, to the deceased Child’s issue (which could include a special needs grandchild). A bequest by grandparents to a special needs grandchild should be made to a special needs trust. If the parents of a special needs child feel there are family members who might make gifts or bequests to his or her special needs child, the parents should discuss with family members this issue to make sure that they understand that to the extent that they do want to leave assets to a special needs child, the assets should be left to the special needs trust created for the benefit of that child.

5. Use a Specialist. It is important that parents use an attorney who specializes in special needs planning instead of a general practitioner since there are specific issues which must be incorporated in a special needs plan.