Mistake #1: Not preparing a stand-alone special needs trust that is in effect immediately.
Some attorneys incorporate a special needs trust for a disabled child into the parent’s estate plan, to take effect when the surviving parent dies. This mistake can be costly. If the child was to receive an inheritance from a relative when the parent is still alive, that gift would go to the child, and would become an asset that might interrupt the child’s receipt of benefits.
Mistake #2: Naming the child individually instead of his or her trust on retirement and insurance beneficiary designations.
Naming the child individually on your beneficiary designations, instead of the child’s special needs trust, will result in the eventual inheritance going to the child outright instead of the child’s special needs trust. The inheritance will then become a countable resource that will likely cause the child to lose certain benefits.
Mistake #3: Not telling family and others that a special needs trust exists.
For family (especially well-meaning grandparents) and others who might include your child in their estate plan, they need to name the child’s trust as the beneficiary, and not the child. They will not know to do this unless they are informed that a special needs trust exists. As with Mistakes #s 1 and 2, any inheritance left outright to a child who receives benefits might jeopardize receipt of those benefits.
Mistake #4: Opening a 529 plan.
Not to pick on grandparents again, but it is common for grandparents to open and fund 529 plans for their grandchildren. This could be costly for a child with special needs. If the child does not go to college, and needs SSI or other benefits at age 18, assets in a 529 plan will likely disqualify the child from receiving benefits, at least until the assets in the plan are spent down. The child would then have to reapply for benefits.
Mistake #5: Leaving no Letter of Intent.
A Letter of Intent is a comprehensive guide that you prepare for when you are unable to care fr your child, either due to your death or incapacity. The guide is for the child’s caregivers to ensure a smooth transition in every aspect of their day and life after the surviving parent passes. Change in routine is very difficult for many kids, particularly those with special needs. Grieving the loss of a parent makes this transition even more difficult. The Letter of Intent advises the caregiver of the child’s daily routine, activities, likes and dislikes, among many other things to ease a tough transition.
If you would like to discuss planning for your child with special needs, contact me at firstname.lastname@example.org.