by Melanie Bradford
A top concern for parents of a child with disabilities is how to provide for the child’s security when the parents are deceased. A will or a living trust naming a guardian for the child is a start, but it is not enough.
The goal of most parents is to provide enough assets to care for their disabled child during the child’s lifetime with any remaining benefits going to other siblings or family members at the child’s death. If your child is disabled, receiving SSI and Medicaid, or, should receive SSI and Medicaid upon turning age 18, the only way to achieve this goal is to have an estate plan that includes a special needs trust for the child.
A special needs trust is a specific type of trust that holds the child’s inheritance so the assets are not counted against the child in establishing or maintaining eligibility for SSI and Medicaid. The child receives available government benefits while the trustee for the trust is able to use the inherited assets to pay for supplemental items the child needs.
This combination of government benefits and trust assets works to provide for the child’s needs while also preserving the inheritance for as long as possible. If the assets are inherited by the child in any way other than a special needs trust and the assets cause the child to have more than $2,000 in total assets, the child will lose available means-tested government benefits such as SSI and Medicaid until the child spends the inheritance.
In other words, to an extent, the system penalizes parents that provide for their disabled child if they do not have the right kind of estate plan. This means that it is critical for parents to have an estate plan that has a special needs trust. In addition, the parents also must plan for who can manage the trust for the child.
Alabama Family Trust (AFT), a local non-profit company established by the state of Alabama to administer special needs trusts (of any size) for disabled individuals, gives parents peace of mind by providing a low-cost, highly skilled trust company that can oversee the trust for the disabled child. This is important because a special needs trust can be difficult for a non-attorney to manage properly to stay in compliance with federal and state law. AFT provides assurance that the trust will be managed properly. Trusted family members or friends can be named by the parents to serve as co-trustees to assist in making certain the needs of the disabled child are known.
AFT also has a charitable trust that is available if a child’s trust has been depleted. This benefit gives parents the knowledge that needs for their child can be provided even if the trust assets have been spent. Additionally, if the trust was established by the parents, any assets remaining in the trust at the child’s death will be distributed to the people or charities named as beneficiaries by the parents.
Parents should also talk with an attorney experienced in establishing estate plans with special needs trusts.
Contact AFT for more information at 205-313-3915 or visit www.alabamafamilytrust.com.
Melanie B. Bradford is a partner with Bradford & Holliman, LLC in Pelham, focusing on estate planning, elder law and special needs trust. 205-663-0281, www.bradfordholliman.com. This article is for educational purposes and is not intended for specific legal advice.