What Are You Waiting For?
Let's say you have a child with "special needs," or another family member. If your estate plan doesn’t have a special needs trust, why not? Here are a few of the excuses I’ve heard, and some thoughts to consider:
I don't have enough money to justify a special needs trust. Really? You don't have $2,000? Because that's all you have to leave to your child outside a special needs trust to jeopardize their SSI and Medicaid eligibility.
I can't afford to pay for the special needs trust. It can be expensive to get good legal help. But the cost of preparing a special needs trust for your child is likely to be much less than the cost of care for a couple of months, which is what will happen if you die without a special needs trust, since it will take that long to maneuver an alternative plan in place. Even if there is no loss of benefits, the cost of fixing the problem after your death will be several times that of getting a good plan in place now, and the result will not be as good.
I've already named my child as beneficiary on my life insurance/retirement account/annuity. If your child is named directly as beneficiary, you may have avoided probate but complicated the eligibility picture. The loss of benefits will occur immediately on your death, rather than waiting the month or two it would have taken to get the probate process underway. This may be the worst plan of all.
It'll all be found money to my kids. I'll let them take care of it when I die. A failure to plan means you are stuck with what's called the law of "intestate succession." Everything will go to some combination of your spouse and children. If your child on public benefits gets a share, he may lose benefits or will have to quickly have a "self-settled" special needs trust, which is expensive and not as flexible as a trust created by his parents.
My child gets Social Security Disability Insurance (or Childhood Disability Benefits) and Medicare. Because those programs are not sensitive to assets or income, your child might not need a special needs trust as much as a child who received Supplemental Security Income (SSI) and Medicaid. But keep these things in mind:
- Even someone who gets most of their benefits from these programs might get some Medicaid benefits, like premium assistance and subsidies for deductibles and co-payments. Failure to set up a special needs trust might affect this.
- Future changes in both Medicare and Social Security might result in reduced benefits for someone who has assets or income outside a special needs trust.
- Your child's living arrangements may change dramatically after your death. Community living arrangements are often paid for or subsidized by Medicaid, and not by Medicare.
- If your child is unable to manage money himself the alternative is a court-controlled guardianship. That can be expensive and constraining. Good trust planning, with a lawyer who can figure out which benefits rules are relevant, is worth the expense.
I'm young. It's not too likely that you will die in the next, say, five years (that's about the useful life of your estate plan, though your special needs trust will probably be fine for longer than that). But "not too likely" is not the same as "it can't happen." You cut down your salt and calories because your doctor told you it'd be a good idea – even though your high blood pressure isn't too likely to kill you in the next five years, either. Now is time to address the need for a special needs trust.
I'm going to disinherit my child who receives public benefits and leave everything to his older brother. That might work. "Might" is the key word here. Is her older brother married? Does he drive a car? Is he independently wealthy? These questions are important because leaving everything to your older child means the entire inheritance may be available to his spouse, creditors, and whims. And have you thought out what will happen if he dies before his sibling, leaving your entire inheritance to his wife or kids? Will they feel the same obligation to take care of your vulnerable child that he does?
I don't like lawyers. Some days I’m not too fond of them, either. But they are in a long list of people we'd rather not have to deal with but do: doctors, auto mechanics, veterinarians, pest control people, parking monitors. We understand, though, that if we avoid our doctor when we are sick the result will not be positive. Same for the auto mechanic when our car needs attention.
Lawyers are like other professionals. We listen to your needs, desires and information, and we give you our best advice about what you should do. Most of us really like people, and all of us, if competent, have taken the time to learn the best constantly changing ways to help you think about and achieving your goals. Imagine asking a computer program for this kind of advice!
*Certified as an Elder Law Attorney by the National Elder Law Foundation