Special Needs Planning increases in popularity

Special needs planning is a rapidly growing area of estate planning.

Here are some excepts from Rachel Emma Silverman, An Estate Plan Built for Special Needs, Wall St. J., Oct. 9, 2008:

Parents of children with special needs often face years of expensive care for their children. Now a growing number of financial-services companies, lawyers and financial planners — often calling themselves “special-needs planners” — are springing up to help parents provide for kids with disabilities, especially when parents are no longer alive to provide care. These professionals guide families through the intricate maze of federal and state programs for disabled individuals, and help set up trusts, insurance policies, retirement plans and estate-planning documents. * * *

More than 41 million Americans, or almost 15% of the population age 5 and older, have some type of disability, according to 2007 Census survey data. Some 6.2% of children ages 5 to 15, or 2.8 million kids, have disabilities, the Census Bureau found. And individuals with disabilities are living longer than ever before. That means that many disabled children will outlive the parents who support them. * * *

Experts often recommend that families create a “special needs” or “supplemental needs” trust as the centerpiece of their plan. Such trusts will provide funds to pay for certain expenses that enhance a disabled person’s quality of life — from residential treatment programs to movie tickets or haircuts — while not cutting off access to government benefits, such as Medicaid or Supplemental Security Income (SSI), which is administered by the Social Security Administration. * * *

Funds transferred to a trust are not considered to be assets of the special-needs individual, as long as there’s an independent trustee who controls distributions of the money and the disabled person can’t just grab cash from the trust at will. A trust also insures that a qualified individual will be watching over the money * * *

Rules governing special-needs trusts are complicated and vary by state and by the source of the funds. * * *

It’s also crucial for grandparents and other relatives to retool their own estate plans to leave gifts or inheritances to the special-needs trust, rather than to the person with disabilities directly, in order to preserve eligibility for government programs. Beneficiary designations on retirement accounts and life-insurance policies should also go to the trust.

Special thanks to Patrick S. Sylvester (Attorney & Counselor at Law, Sylvester Law Firm, PC) for bringing this case to my attention.