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Phone: 201-345-3018

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Special needs trusts a valuable estate planning tool, P.1

Ensuring that a loved one with special needs is properly cared for is often a burden for many families. The number of families dealing with this challenge is not small either. Census statistics show that roughly 21 million families are currently caring for an individual with special needs, and one in every 26 families is raising a child with a disability.

It is important for families dealing with this challenge that they understand the importance of proper financial planning. Rising health care costs, limitations in eligibility for government benefits, unemployment among parents with disabled children, and the historic opportunity to transfer large amounts of wealth free of taxes are all reasons to get on the ball with a financial plan.

One thing to keep in mind is the importance of financially planning in such a way that a special needs individual is not disqualified from government benefits. Requirements and restrictions on available assets often lead families to believe that the best approach is to disinherit their loved one in order that they will thereby qualify for those benefits. But income the special needs individual receives later on can end up disqualifying them. And leaving a loved one to government support doesn't exactly engender great piece of mind.

Other families choose to leave funds with a special needs child's sibling, but there is no way to guarantee that that sibling will honor the commitment to care for the child or that the assets provided for their care will be devoted exclusively to that purpose.

Setting up a special needs trust for the care of disabled children is a great way to plan for that child's future for a number of reasons. In our next post, we'll take a look at the basic features of this estate planning tool.

Source: Business Insider, "Unique Ways To Ease The Financial Burden Of Special Needs Care," Joe Mont, January 11, 2012.

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