Life throws us curveballs- things we least expect, don’t plan for, or just don’t expect. One of the joys of life is that blessed event of having a child. As anyone who has had the pleasure, its commonplace to immediately upon birth count your child’s fingers and toes and breathe a sigh of relief when you get to twenty. I remember with great clarity the morning my daughter was born, and in recent years, the wonderful addition of my grandson to our family. It definitely ranks right up there with life changing events.
While we all pray for a healthy child, in today’s society the definition of healthy has vast meanings. Life is not perfect, and neither is the creation of children. There is no definition of “normal” and each human on the planet is their own variation of what the good lord intended to create. Those children who don’t develop in accordance with the charts and expectations of normal development are classified to be a “special needs child.” While normally developing children are measured by what they do: crawling, taking the first steps, talking, reading- special needs children are measured by what they can’t or don’t do. Activities avoided, delayed milestones, inability to complete tasks or learn certain things are but a miniscule measurement of defining a special needs child. While a diagnosis may be of the same name, the children are vastly different, as we all are. The one common trait is that they are all beautiful from the inside out.
Having a special needs child poses somewhat of a challenge during the financial planning process for the parents. Usual and customary inter-generational planning gives way to the question of taking care of the child in the untimely event of a premature death of the parent or parents without the family’s wealth mismanaged or misdirected away from the benefit of the child. Oftentimes the child is receiving benefits from the Federal Government or State via assistance programs and a bequest from life insurance, annuities, IRA, or other inherited assets may cause the child to loose those benefits. The trust is an entity, similar to a person, has it’s own tax ID number and would hold those assets for the benefit of the child without the child claiming ownership.
Generally, a special needs trust is established by the parents or relatives of the disabled child. It includes a trustee or trustees who are responsible for the assets and mechanics of the trust, governed by the terms set forth by the grantors at the establishment of the trust. The funds are utilized for the benefit of the child for a variety of needs including but not limited to medical care, housing, education, medical care, support, or any needs defined as to be in the interest of the child. If Medicaid benefits are applied for benefits may be denied if transfers to the trust have occurred within 60 months of application for Medicaid benefits.
The transfer of assets and the formation of a special needs trust is a personal need and requirement, and varies from situation to situation. Laws vary from state to state, and can be very complex. Speak with a qualified Certified Financial Planner™ and attorney to see how this estate planning tool may fit into your family plan.
