Estate Planning for Children with Special Needs
Challenges Specific to Parents with Children with Special Needs
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Parents with children with special needs face unique challenges, especially in regards to estate and financial planning. This can be a very complicated process and requires working with attorneys and insurance professionals with expertise in the area of special needs planning. The myriad of laws, both federal and state, that affect special needs planning are extensive and complex. It is imperative that an attorney specialize in this area of law. In addition, a financial plan must be developed and implemented to ensure the child with special needs is financially secure throughout their life. Many of the steps are the same estate planning that all parents take to protect their love ones. For example:
- General durable power of attorney for financial affairs
- Durable power of attorney for health care
However, parents of children with special needs need to take a few additional steps:
- Drafting a “Letter of Intent.”
- Ensuring guardianship (upon reaching age of majority if the children with special needs are not able to manage their own affairs)
- Providing financial security for a child with special needs by establishing a special needs trust and funding that trust with cash, securities, or life
Why a Special Needs Trust?
Need: This is a mechanism that will provide for a child with special need’s financial well being if their parents can no longer do so, and without disqualifying the child for government benefits.
Solution: Create a special needs trust to be funded by life insurance. Life insurance is a critical element of a good comprehensive financial plan for parents with children with special needs. By purchasing life insurance and having the proceeds payable to the trust, this preserves the federal and/or state funds the child with special needs receives. In addition, the death proceeds are received by the trust income tax free. The cash in the life insurance policy also builds income tax free and can be used in several ways:
- Any current and future expenses the child with special needs may incur.
- To hire a caregiver when the child with special need’s parents are still living, but no longer can take care of their child with special needs.
Given the unique situations and special problems that may arise in the estate and financial planning process of a child with special needs, an experienced attorney and insurance professional are a must. Our attorneys are experienced in the creation and drafting of Special Needs Trust instruments and the myriad of issues effecting families with children with special needs. We have a Certified Public Accountant/Attorney on staff so that any tax consequences can be quickly and efficiently addressed. In addition, our insurance resource has over 30 years in the life insurance industry and works with insurance companies that have Special Needs Planning Departments.
Kommer Bave & Ollman, LLP, is a sponsor of the “Walk in the Park for Abilis,” a 62 year old charity with offices in Greenwich and Stamford, CT; advocates for and supportive of people with developmental disabilities. www.abilis.us