When an adult child has special needs that require the help and support of parents it is important to create an estate plan that makes sure that support is provided after the parents pass away. This requires an estate plan that provides for the child's monetary needs in a way that does not disqualify the child from receiving government benefits. It also often requires creating an estate plan that provides those funds in a way that is fair to other children.
Recently, the Wall Street Journal discussed a couple of tools to accomplish these goals in "Estate Planning When You Have a Special-Needs Child."
The tools include:
- Supplemental Needs Trust – These trusts allow parents to leave assets for the care of a child with special needs, but leave those assets under the control of a trusted third-party who can make sure the assets are used appropriately and invested wisely. They also help prevent disqualification from receiving government benefits, which is often the result if a child with special needs is left a large inheritance in one lump-sum.
- Life Insurance – To fund a trust for a child with special needs, parents can take out life insurance policies and make the trust the beneficiaries of the policies. This allows the parents to divide their assets between all of their children equally while providing the extra funds for the child with special needs in a way that other children will not view as unfair.
These are only two of several options for providing for child with special needs in an estate plan.
Speak with an estate planning attorney about the other options and what might be best for your family.
Reference: Wall Street Journal (March 27, 2016) "Estate Planning When You Have a Special-Needs Child."