Parents of special-needs children face many obstacles when it comes to planning for the future. In addition to the legal and financial ramifications of caring for children while the parents are still alive, those parents also must make preparations for continued care and support after they die.
In previous installments, we’ve discussed some of the planning stages, including the legal, financial, and medical considerations parents of special-needs children must take into account as they go through end-of-life planning. Here, we’ll talk about some of the legal instruments available, including letters of intent and special-needs trusts.
Letters of Intent
A letter of intent serves as a blueprint of a parent’s final wishes when it comes to caring for a special-needs child. This legal document goes hand in hand with a will or a special needs trust. Although the document itself is not legally binding, it offers survivors the ability to understand the deceased’s wishes clearly. Survivors who are tasked with managing the care of a special-needs child need to know what the deceased intended as to the distribution of assets and the long-term care plan for the child.
A letter of intent contains a broad range of information, including:
- Medical details about the child, including long-term prognoses, medications required for care, instructions for emergency care, names and contact information of medical professionals who provide care, etc.
- Details about the child’s daily abilities (or inabilities) in caring for him or herself.
- Information about any special equipment the child currently uses to handle daily tasks as well as needs for equipment in the future. The letter should also provide details about where to seek equipment and maintenance/repair of the needed equipment.
- Information about living arrangements, such as where the parent wishes the child to live after the parent dies, special facilities where care can be provided, relatives or other caregivers, etc. This can require a lot of estimation, especially when the child’s health or abilities will deteriorate over time.
- Details about education the child has received as well as information about any future education or training the parent wishes the child to have.
- Dietary details, such as the child’s favorite foods, any food allergies, dietary restrictions, issues with swallowing or digestion, etc.
Perhaps most important in the letter of intent is the financial information. The parent should include any details about the assets he or she owns, what is to be done with those assets when the parent dies, and how those assets are to be used for the care and support of a special-needs child well into the future. The letter should also provide contact details for any attorneys and medical care professionals so that the surviving family members, trustees, and relatives know who to contact for more information about the child’s care.
Remember that letters of intent are not legally binding. However, they offer survivors a great “snapshot” and understanding of final wishes, especially as they pertain to the care of a special-needs child. Not all disabled people need round-the-clock medical care or assistance with daily tasks like bathing or dressing. Others may need specialized care, medical treatments, and even unique living arrangements. Health of a special-needs child may get worse over time, and in order to ensure adequate financial and medical support, the letter of intent is a treasure trove of details. The child’s needs should be spelled out so that everyone understands the current situation and what may need to be addressed in the future.
Special Needs Trusts
Trusts are a great way for families to avoid the expense and frustration of the probate process that comes into play when a will and testament is used. With a will, a lengthy process starts; a probate court evaluates the will and makes determinations on its validity before assets are distributed to named beneficiaries.
A trust, on the other hand, allows an asset owner to transfer any financial assets to a legal entity as defined in the trust. In other words, the trust itself becomes the asset owner and manager. Establishing a trust prevents the need for a probate hearing, saving time and considerable expenses for family members of the deceased person. A named trustee or trustees handle the disposition, distribution, and disposal of the trust’s assets as needed.
An added benefit of special needs trusts is their power in preserving federal benefits. In most cases, if a special-needs child inherits assets worth more than $2000, they may lose eligibility in federal programs like Social Security supplements and Medicaid. A special needs trust is different; since the assets and inheritances are left to the trust rather than the child, eligibility is not affected.
There are several trusts that people can establish, such as special trusts that provide incredible control over the management, distribution, and disposal of assets. Some of these special trusts include spendthrift trusts, which are designed to prevent wasteful spending by a financially reckless child, or a special needs trust which can provide finances for the care of developmentally disabled beneficiaries. In a special needs trust, the trust is designed to protect assets while providing continued care and support for disabled children (even adult-age special-needs individuals). Assets can be used for such thing as:
- Training, rehabilitation, and education for the child
- Medical and rehabilitative equipment
- Insurance premiums
- Medical and dental expenses
- Home health care aides/nurses/physical therapists
- Quality of life items
Establishing a special needs trust requires the expertise of an estate planning attorney. That attorney can guide parents toward establishing the right trust that protects and preserves financial assets while ensuring the continued care and support of disabled children, even after the parent or parents pass away. It is also important to remember that other family members, such as grandparents, who wish to lend support by leaving assets to the child MUST bequeath those assets to the trust, not the individual. Again, this preserves eligibility in federal needs-based programs.