How Our TX and AR Estate Planning Attorneys Help Parents With Critical Considerations for Special Needs Children
Estate planning often serves a purpose that goes beyond naming heirs and distributing inheritances. Ross & Shoalmire, Elder Law Attorneys, can help you chart the best course for an uncertain future, providing solutions to ensure that your child’s future needs are met without sacrificing their rights to public assistance.
4 Reasons You Need an Estate Plan to Protect Your Child’s Future
Since intellectual disabilities can make it difficult to compete in the workforce or live a truly independent life, many children with special needs receive support even after becoming adults and joining the workforce. However, providing support presents novel challenges. Many public assistance programs only award benefits to applicants whose income or assets fall below a certain level. So leaving a large inheritance or sending regular maintenance payments puts your child at risk of not having access to essential state services.
Although both Texas and Arkansas offer parents a way to protect their children’s future financial and health needs without compromising their public benefits eligibility, families still must often take a more proactive approach to estate planning. Here are our top four recommendations for creating a sound strategy.
1. Anticipate Incapacity
Although imagining a world where you can’t provide for your child is difficult, planning for potential incapacity is a critical first step in protecting their well-being. Without the right plan, your health, wealth, and family’s stability could be compromised by burdensome court processes. Minimize potential complications by establishing the following.
An Advance Directive
An advance directive, or health care directive¸ is a legal document used to detail your preferences for end-of-life care. In Texas, the most common types of advance directives include:
- A directive to physicians, sometimes termed a “living will,” is used to communicate whether you should receive life-sustaining care if you have a critical condition and are unlikely to recover.
- A medical power of attorney, which lets you name a trusted agent to make medical decisions on your behalf should you ever become seriously injured or otherwise incapacitated.
- Do-not-resuscitate (DNR) orders instructing emergency medical professionals not to attempt resuscitation.
A Durable Power of Attorney
This is a formal and legally binding document authorizing another person, called your “agent” or “attorney-in-fact”, to make certain transactions on your behalf. Powers of attorney can take effect immediately, or activate only in the event of incapacity. Depending on the structure of your durable power of attorney agreement, your attorney-in-fact could help:
- Pay your rent, mortgage, or other bills
- Oversee the day-to-day operations of a business
- Manage your retirement fund or stock portfolio
Agents are bound by a fiduciary duty to act in the best interests of their principal. This means they could be subject to legal action if they attempt to abuse their position for self-gain.
Guardianship Arrangements
Every parent should have a will even if they’re young and expect to live a long and healthy life. Your will provides an opportunity to:
- Keep your estate, your assets, and your child’s inheritances out of probate.
- Decide how your assets should be distributed after your death.
- Ensure your family’s affairs remain private, and don’t become a matter of public record.
However, parents have another major consideration for writing a will. It entitles you to nominate a guardian for your minor child—somebody who can provide for their needs and sustenance should anything happen to you. However, without a will, this decision must be made by a court. Although Texas and Arkansas courts typically try to prioritize the needs of a child in assigning a guardian, they’re nonetheless bound by strict legal procedures.
2. Choose the Right Type of Special Needs Trust
One of the biggest challenges parents of children with special needs face is providing meaningful financial support without risking their child’s eligibility for public benefits programs. In Texas and Arkansas, certain types of trusts are used to provide maintenance funds without federal assistance. These include:
Support Trusts
This trust is structured to regularly distribute funds for self-maintenance. Payments can be applied to purchases and expenses including, but not limited to:
- Food
- Shelter
- Clothing
- Medical care
- Education and vocational training
However, support trusts have a significant drawback. Unlike other types of special needs trusts, this arrangement might count against a beneficiary’s eligibility for Supplemental Security Income (SSI) and Medicaid. The Estate Planning Attorneys at Ross & Shoalmire share essential knowledge of this process so you can make the best decision on behalf of your child.
Special Needs Trusts
Sometimes referred to as a “supplemental trust,” this is used to hold and manage assets for a beneficiary with disabilities. Unlike support trusts, special needs trusts permit distributions without impacting a recipient’s eligibility for public benefits.
Most special needs trusts are categorized in one of two ways:
- First-party special needs trusts. Also known as “self-settled special needs trusts”, these are funded by income or assets owned by the child with disabilities. To preserve eligibility for federal benefits programs, these trusts must typically be irrevocable, established by the beneficiary’s 65th birthday, and contain a provision promising to reimburse Medicaid upon the trust’s termination.
- Third-party special needs trusts. These provisions are created by you as part of the estate planning process. These trusts are usually funded through cash gifts, an inheritance, or proceeds from a life insurance policy.
Special needs trusts are versatile—beneficiaries can use their distributions for a wide range of purposes, ranging from medical care and physical rehabilitation to daily transportation and planned vacations. Like most other types of trusts, special needs trusts can be conditioned by their grantor. This means you, as a parent, retain control over how money is being spent.
3. Select a Responsible Trustee
Both Texas and Arkansas let the parents of special needs children establish different types of trusts to ensure their loved ones receive support without any threat to their public benefits eligibility. However, the success of a trust is very much dependent on your choice of successor trustee—the person or party responsible for administering the trust.
Although many parents nominate another relative to serve as successor trustee, keeping trust administration within the family is a risky proposition. Even if you’re confident that a sibling or cousin is honest and trustworthy, ensuring that a beneficiary remains eligible for SSI and Medicaid can be challenging. Any mistake, no matter how minor, could disrupt the trust in ways that cannot easily be anticipated.
As a general rule, your estate planning attorney is the safest choice for a successor trustee: your lawyer knows how to maximize a trust’s benefits with minimal risk, and is bound by stringent rules of professional conduct that make accountability their biggest priority.
4. Keep Your Estate Plan Accurate and Up-to-Date
A well-considered estate plan could provide a child with special needs essential resources to live a more independent and fulfilling life. However, it only works best when its features reflect your present circumstances. Any significant life event—a new marriage or divorce, the birth of another child, or a sudden change in benefits eligibility—is a reason to revisit your estate plan and to ensure the terms you’ve set are best suited to provide for your child’s future.
Ross & Shoalmire’s Elder Law Attorneys could help you keep your estate plan effective, accurate, and up-to-date by:
- Exploring estate planning solutions that work best for your family’s needs and financial circumstances.
- Protecting you from the legal perils of incapacity.
- Establishing a special needs trust that provides your child with lifelong support and doesn’t run the risk of cutting them off from critical public assistance programs.
