Special Needs Planning
It takes careful planning to provide properly for a loved one with a disability. Families with children with special needs have to be aware of financial planning tools like special needs trusts. They also must consider guardianship and transition planning, as well as providing for their loved one in their estate plan.
Special Needs Trusts
Children and adults with disabilities often rely on public benefits, especially Supplemental Security Income (SSI) and Medicaid. These programs are need-based, which means they have strict income and resource limits.
This can present a dilemma, as families naturally want to help provide their loved one with a secure future, but transferring certain resources to the individual will trigger ineligibility for vital benefits. Special needs trusts are one solution to this problem.
Special needs trusts, also known as supplemental needs trusts, allow you to set aside funds for an individual with a disability, without jeopardizing their eligibility for public benefits. As with other kinds of trusts the person creating the trust (who is known as the trustor or grantor) designates a trustee who controls distributions of money for the benefit of the beneficiary (the person with a disability). Because the money in the trust is not held in the name of the beneficiary, it does not count as a resource for SSI and Medicaid.
- Funds in a special needs trust can only be used for certain supplemental needs, not for basic necessities.
- Supplemental needs include travel, education, recreational and cultural experiences, and medical expenses not covered by Medicaid.
- Basic necessities include groceries, rent or mortgage payments, renter’s or homeowner’s insurance, utilities, restaurant meals if on a regular basis, or cash given to the beneficiary.
In order to meet the requirements of government benefit programs, the funds in a special needs trust can only be used for certain supplemental needs, not for basic necessities such as food or housing. Trust funds can be used for things like travel, education, recreational and cultural experiences, and medical expenses not covered by Medicaid. Trust funds cannot be used for groceries, rent or mortgage payments, renter’s or homeowner’s insurance, utilities, restaurant meals if on a regular basis, or cash given to the beneficiary.
This type of trust can be a crucial tool to improve the life of a person with a disability. Creating a special needs trust is complicated, and there are many detailed rules that must be followed, so consulting with a special needs planning attorney is essential.
ABLE accounts are another special needs planning tool that recently became available. Created by the Achieving a Better Life Experience (ABLE) Act, these accounts were introduced in New York State in 2017.
ABLE accounts allow an individual with a disability to save money without losing their eligibility for public benefits. They are similar to special needs trusts, but with important differences.
ABLE accounts are tax-advantaged accounts that are comparable to 529 savings plans for college. Funds deposited in an ABLE account do not count as resources for Medicaid eligibility, and they do not affect SSI eligibility as long as the balance stays at $100,000 or less. Distributions from the account are not considered income to the individual by either program.
The maximum amount that can be deposited in an ABLE account per year is the same as gift tax exclusion amount for federal income tax, which is $15,000 in 2018. The maximum that can be contributed over time is the same as the state’s maximum for 529 accounts, which is $520,000 in New York State.
Contributions are not tax deductible, but they do fall within the gift tax exclusion. The growth of the account is tax-free, and distributions are not taxed, if they are made for qualified disability expenses. This can include any expenses related to the person’s disability, such as education, housing, transportation and assistive technology.
- The maximum amount that can be deposited in an ABLE account per year is the same as gift tax exclusion amount for federal income tax, which is $15,000 in 2018.
- The maximum that can be contributed over time is the same as the state’s maximum for 529 accounts, which is $520,000 in New York State.
- ABLE accounts are only available to people whose disability began before age 26, a restriction that does not apply to special needs trusts.
ABLE accounts are simpler to set up than special needs trusts, but consulting with a special needs planning attorney is still recommended. ABLE accounts are only available to people whose disability began before age 26, but special needs trusts have no such restriction. Special needs trusts also do not have the contribution limits that ABLE accounts have. An individual may have both a special needs trust and an ABLE account, and choosing the right options for you and your family should be done with the advice of your attorney.
When a child with special needs is approaching adulthood, significant changes are in store. Your child’s right to special education services will end when the child receives a high school diploma, or ages out of the New York State school system, which occurs on June 30 of the school year during which they reached the age of 21.
You and your child will have to consider options for a residence, further education, possible employment and social activities in adulthood. This is a process that should begin by the time the child turns 15, or even earlier. Transition planning should be a major focus of the high school experience, and parents should work with the child’s IEP team to ensure that special education resources are being used to prepare the child to achieve realistic and measurable postsecondary goals.
If your child plans to attend college or another postsecondary educational institution, securing necessary accommodations for their disability will be essential, and the child should be acquiring independent living and self-advocacy skills while in high school. If the child plans to enter the workforce, you may want to consider supported employment options, and the child’s high school years are the time to begin to familiarize yourself with community organizations that can assist with vocational programs, as well as housing, transportation and other needs. Your special needs planning attorney can help you find these resources and make use of them efficiently.
As your child with special needs approaches adulthood, it is also time to determine whether guardianship will be necessary. Parents are used to making legal and medical decisions for their child, but without guardianship, those powers will cease as of the child’s 18th birthday.
If your child will not have the capacity to make such decision, then guardianship proceedings need to be initiated a year or more before the child turns 18. In New York State, there are different types of guardianship proceedings for different types of individuals, which are filed in separate courts. Typically for a child with special needs turning 18, an Article 17-A guardianship will be appropriate, which is filed in Surrogate’s Court. This type of guardianship can be over the person, over the property, or both. Certifications from medical professionals are required, and it is highly recommended to consult with an attorney before filing such a guardianship petition.
If your child will be able to make most medical and legal decisions on their own, then guardianship may not be appropriate, but there are other documents that should be in place. A power of attorney, health care proxy and a living will can ensure that you are able to have access to medical records and help with major decisions, especially in an emergency situation.
- The process of planning options for a residence, further education, possible employment and social activities in adulthood should begin by the time your child turns 15.
- Guardianship proceedings can take time and need to be initiated a year or more before your child turns 18.
- Your power to make legal and medical decisions for your child, without guardianship, cease as of your child’s 18th birthday.
Letter of Intent
When you have a child with special needs, a letter of intent is an important part of your estate plan.
In addition to your will, any trusts and instructions regarding guardianship that you have created to provide for your child after your death, you will want to pass on all of the vital knowledge about your child’s individual needs and wishes. Crucial details about the child’s medical, social, educational and behavioral requirements can be documented in a letter of intent. This is not a legal document, but a set of instructions for a future caregiver about your child’s specific abilities, interests and needs. A special needs planning attorney can help you draft a letter of intent that communicates your wishes for your child in an effective way.
How a Special Needs Planning Attorney Can Help
Planning for your child’s future can seem overwhelming but you do not need to face these tasks alone.
In fact, seeking the assistance of an attorney is the best approach. When you consult with Littman Krooks special needs planning attorneys, we will take the time to get to know your child’s needs and your family’s goals for the future. We will make sure you understand your options to achieve those goals, and help you put the necessary tools in place. We look forward to helping you build a secure foundation for your child’s future.
Special Needs Alliance Member
The Special Needs Alliance is a national organization comprised of attorneys dedicated to the practice of special needs, guardianship, disability and public benefits law. The Special Needs Alliance is an invitation-only organization whose membership is based on a combination of relevant legal experience in the disability and elder law fields, direct family experience with disabilities, active participation with national, state and local disability advocacy organizations, and professional reputation. Littman Krooks is the only firm in the Westchester, Hudson Valley and New York City area with Special Needs Alliance members.
Contact Littman Krooks to learn how we can serve your special needs planning goals.