NINE COSTLY MISTAKES TO AVOID WHEN PLANNING FOR A SPECIAL NEEDS CHILD
The Law Office of Diedre Wachbrit
4035 E. Thousand Oaks Blvd.
Westlake Village CA 91362
Day Phone: 805-778-0600
Diedre Wachbrit, Esq. presents Special Needs Trusts as a viable legal AT remedy for ensuring quality of life and essential benefits to persons with disabilities. (via PPT)
COSTLY MISTAKE #1 DISINHERITING THE CHILD
Many disabled people rely on SSI, Medi-Cal or other government benefits to provide food and shelter. You may have been advised to disinherit your disabled child - the child who needs your help most to protect that child's public benefits. But these benefits rarely provide more than subsistence. And this "solution" does not allow you to help your child after you are incapacitated or gone.
When your child requires
or is likely to require governmental assistance to meet their basic needs, you
should consider establishing a Special Needs Trust.
COSTLY MISTAKE #2
IGNORING THE SPECIAL NEEDS WHEN CREATING A TRUST FOR THE CHILD
A Trust that is not designed with your child's special needs in mind will probably render your child ineligible for essential benefits. The Special Needs Trust is designed to promote the disabled person's comfort and happiness without sacrificing eligibility. Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (such a specially equipped vans), training & education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive spending money, electronic equipment & appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses: the sorts of things you now provide.
COSTLY MISTAKE #3
CREATING A "GENERIC" SPECIAL NEEDS TRUST THAT DOESN'T FIT
Even some "special needs trusts" are unnecessarily inflexible and generic. Although an attorney with some knowledge of the area can protect almost any trust from invalidating the child's public benefits, many trusts are not customized to the particular child's needs. Thus the child fails to receive the benefits that the parent provided when they were alive.
Another mistake attorneys
with special knowledge in this area see others making time and time again is
putting a "pay-back" provision into the trust rather than allowing
the remainder of the trust to go to others' upon the special needs child's
death. These "pay-back" provisions are necessary in certain types of
special needs trusts. An attorney who knows the difference can save your family
hundreds of thousand of dollars, or more.
All too often, attorneys
make Special Needs Trusts “irrevocable” upon signing. While this is appropriate
in rare cases, most parents prefer to retain their right to improve and fine
tune the trust as the years pass. Over time, their child’s evolving needs can
inform the trusts provisions and just as important, changes in the law can be
addressed by changes in the trust. If there’s one thing I can say for sure
about the law, in this area, it’s that the law will be very different in 10
COSTLY MISTAKE #4
Because none of us knows when we may die or become incapacitated, it is important to plan for your special needs child early, just as you would for other dependents such as minor children.
Unlike most other
beneficiaries, your special needs child may never be able to compensate for
your failure to plan. A minor beneficiary without special needs can obtain more
resources as he or she reaches adulthood and can work to meet essential needs.
Your special needs child may not have that opportunity.
COSTLY MISTAKE #5 FAILING
TO INVITE CONTRIBUTIONS FROM OTHERS TO THE TRUST
A key benefit of creating the trust now is that your extended family and friends can make gifts to the trust or remember the trust as they plan their own estates. You can also consider whether making the trust the beneficiary of a life insurance policy makes sense now, while you are healthy and insurance rates are low.
In addition to the gifts
and inheritances from other people who love your child, you can leave your own
assets to the trust in your will. You can also name the trust as a beneficiary
of life insurance or retirement benefits.
COSTLY MISTAKE #6
CHOOSING THE WRONG TRUSTEE
During your life, you can manage the trust. When you and your spouse are no longer able to serve as trustee, you can choose who will serve according to the instructions that you have provided. You may choose a team of advisors. You may choose a professional trustee. Make sure that whomever you choose is financially savvy, well-organized, and, most important, ethical.
COSTLY MISTAKE #7 RELYING
ON YOUR OTHER CHILDREN TO USE THEIR MONEY FOR THE SPECIAL NEEDS CHILD'S BENEFIT
You can rely on your other children to provide for your special needs child from their own inheritances. That can be a temporary solution for a brief time, such as during a brief incapacity if your other children are financially secure and have money to spare. However, it is not a solution that will protect your child after you and your spouse have died or when siblings have their own expenses and financial priorities because of the many potential problems.
What if your child with
the money divorces? His or her spouse may be entitled to half of it and will
likely not care for your special needs child. What if your child with the money
dies or becomes incapacitated while your special needs child is still living?
Will his or her heirs care for your special needs child as thoughtfully and
completely? What if your child with the money loses a lawsuit and has to pay a
large judgment or has other significant creditor problems? The court will
certainly require your child to turn that money over to the creditor.
If you create a special
needs trust, you protect all of your children. The trust facilitates easier
record-keeping and allows your other children to rely on the assistance of a
professional trustee, if needed. Siblings of a special needs child often feel a
great responsibility for that child and have felt so all of their lives. When you
provide clear instructions and a helpful structure, you lessen the burden on
all your children and you support a loving and involved relationship between
COSTLY MISTAKE #8 FAILING
TO PROTECT THE SPECIAL NEEDS CHILD FROM PREDATORS
An inheritance from parents who fund their child's special needs trust by will rather than by revocable living trust is in the public record. Predators are particularly attracted to vulnerable beneficiaries, such as the young and those with limited self-protective capacities. When you plan with trusts, you decide who has access to the information about your children's inheritance. This protects your child and other family members, who may be serving as trustees, from predators.
COSTLY MISTAKE #9 FAILING TO PROPERLY “FUND” AND MAINTAIN THE PLAN
Every trust-based estate plan requires changes to asset ownership and beneficiary designations. If the plan includes life insurance protection (done with an “Irrevocable Life Insurance Trust”), these asset transfers become complicated.
Your attorney or your attorney’s Funding Director should explain which asset goes where, and why. If this explanation doesn’t make complete sense, or if you suspect the assets were not properly transferred, take action! Call your attorney and ask for a report. This is one of the most common reasons estate plans fail.