Special Needs & Guardianships
Parent of a Child With Special Needs? What should you be doing now to protect your child’s future?
A common concern for parents of children with special needs centers around the possibility of a day when both parents are no longer capable of taking care of their child. Of course, the big decision is “who” will take over in caring for your child, but aside from this, there should also be major concerns of “how” your child will be cared for. These are both very big decisions that could have major adverse consequences if not properly planned for.
The major decision of “who” will care for your child should be addressed in a Last Will and Testament, as well as in a Durable Power of Attorney. The designations set out in these documents will simply assist a judge in making the decision of who should become guardian for your child should you pass away, or should you become incapacitated. The judge’s final decision will be based on the best interest of your child, but your written instructions will carry a significant amount of weight in the making of that decision.
The harder, more complicated decision for a parent may be “how” your child is cared for. In particular, if proper planning is not in place, your child’s needs-based benefits may be in jeopardy. For instance, should your child be a recipient of SSI and Medicaid (or one of the Medicaid Waiver programs), then it is imperative that any inheritance going to your child be placed into a special trust to ensure that your child does not lose his/her benefits. The same holds true for any inheritance your child receives from other family members. The key concept to remember is that SSI and Medicaid are needs based programs. Should your child receive money or property, your child may very likely lose these benefits due to the fact that your child now has resources that must be utilized for his or her care. This may be a devastating result to your child.
So, what can you do? The answer is surprisingly simple: PRE PLAN! The best thing for you to do right now is put a plan in place that will address your child’s needs. In putting a plan in place, remember that there’s primarily three large issues at hand: (1) Who is going to be responsible for your child? (2) How can you leave money to your child to ensure continued public benefits? and (3) How can you make sure that your child is properly cared for in a manner that you desire? Each of these elements must be addressed now in order to prevent potential catastrophic results from occurring when you pass away or become incapacitated.
First, make sure that you’ve executed a Last Will and Testament and a Durable Power of Attorney that specifically states the person(s) that you want to be guardian of your child if you were to pass away or become incapacitated. This signed statement of your intent is vital to express your preference at a point in time where you may unable to speak. Of course, the individual you choose is very fact specific, but some things that you should consider are the age of the individual, the location of the individual, other responsibilities of the individual, and most importantly, the current relationship that exists between your child and the individual. Because facts can change over time, it is important to make sure to review the designation periodically over time to ensure the chosen individual remains your first choice.
Secondly, make absolutely sure that any property you leave to your child does not jeopardize his/her needs-based benefits programs. One way to achieve this goal is through a third-party Special Needs (or Supplemental Needs) Trust. Basically, this is a document created by a donor for the purpose of setting aside money or property for a person with special needs without jeopardizing SSI or Medicaid. For example, suppose that the parents and grandparents wanted to leave money to a child with special needs. If left outright (meaning a direct transfer of the property to the child), the child’s benefits would be terminated if over the SSI/Medicaid resource limitation. However, if a third-party Special Needs Trust were established, this would allow for both the parents and grandparents to leave money to the Trustee of the Trust, rather than directly to the child. The Trustee could then utilize the funds for the benefit of the child through his/her lifetime, while maintaining the child’s SSI/Medicaid. Likewise, a parent may utilize life insurance to provide a lump sum of cash to the Trust to benefit the child. Regardless of the manner in which funds are placed in the Trust, the Trust will be there to ensure that your child will enjoy a more enriched quality of life without terminating SSI/Medicaid.
Finally, and often most important to the parent, how can you make sure that your child is properly cared for in a manner that you desire? For instance, how will the new guardian and the Trustee of a Special Needs Trust know that your child loves nothing more in the world than going to Razorback baseball games? How will they know the benefit and the importance of sending your child to certain summer camps? How will they know all of those small, everyday details of your child’s life that you know should continue in your absence? The short answer is that they won’t. Because of this, I encourage each and every parent I meet with to take the time to prepare a Memorandum of Intent that outlines all of these details. While the Will, Durable Power of Attorney, and Special Needs Trust are vital components to planning, they are primarily legal documents. As such, they address the legal components to name a guardian and protect the money left to your child. Unfortunately, however, they often fail in providing guidance for those who are now faced with the responsibility of taking care of and providing for your child. These individuals are going to be in desperate need of direction and guidance. As such, there’s no better way to provide direction than to have specific instructions from the parent. You cannot be replaced, but you can certainly help to make sure your child’s quality of life is maintained.
In implementing all of the above, parents can have peace of mind in knowing that a thorough plan is in place to address each of their child’s needs. However, parents should also use caution in making sure that all of these components are drafted and executed properly. In particular, Special Needs Trusts are highly complex tools that certainly will be scrutinized by Social Security and/or the Department of Human Services. Because of this scrutiny, it is absolutely imperative that parents use an attorney that deals with these matters on a routine basis, and who is knowledgeable with the drafting requirements and pitfalls that exist with these tools. You should seek an attorney with the experience and credentials that lets you know that he or she knows and understands the workings of these documents and the various reviewing agencies. Quality of the work matters! Unfortunately for many individuals, at the point in time where it is discovered that the document fails to meet the required legal criteria, the damage has already been done and the child’s benefits are terminated. This is a devastating result for a child, particularly when his/her parents had attempted to take the necessary steps to protect against this result.
If you have any questions about the planning techniques discussed above, please feel free to call us to discuss planning options.