My theme this month has generally been constant reminders for my clients and readers to keep their Estate Planning documents up to date. A frequently reviewed estate plan is important for everyone, but it is doubly important for those who have dependents with special needs. Special needs planning covers all of your bases: Finances, Public Benefits, and Trustees. Whatever the reason, if you have a dependent who will be financially dependent on others for their entire life, there are a few unique strategies to consider in order to provide them financial and social options even after you are gone.
Strategies for Estate Panning for Dependents with Special Needs
Without a special consultation, many people’s first instinct is something along the lines of, “The more money the better, right?” It may seem like common sense, but before you start divvying out your inheritance, it is wise to sit down with your attorney and discuss your goals. What level of care will they require after you are gone, and which government benefits are they eligible for? It might actually make more sense to leave a smaller dollar amount, so they are eligible for Social Security benefits. In short, the three thoughts you should have in mind while creating your estate plan are the following:
- Organize lifetime finance management for the dependent.
- Consider eligibility for government programs such as public benefits or Social Security.
- Consider pool of resources for future use, should current benefit opportunities end.
Supplement vs. Supplant: What is a Special Needs Trust?
There are many options when it comes to estate planning for dependents with special needs. The most common route is something called a Special Needs Trust. In Louisiana, the state mandates a concept called “Forced Heirship.” This concept prohibits people from disinheriting certain family members. The most common examples are children, grandchildren, and spouses.
A Special Needs Trust is, by definition, a fiduciary relationship that enables a disabled dependent to receive income as well as continue their eligibility for public assistance disability benefits. These benefits include Social Security, Medicare, or Medicaid. This is typically the most popular option because the trust essentially covers the financial needs of your dependent that are not met by public benefits.
Tax Considerations for Your Special Needs Dependent
If you are going with a Special Needs Trust, or a trust of any variety, you need to consider whether to make it revocable or irrevocable. The names are pretty self-explanatory. A revocable trust is a fiduciary agreement in which the grantor can change the terms at any time. An irrevocable trust cannot be changed. Both options have unique benefits!
- With a revocable trust, you have more control over the trust, and income tax considerations are not a concern to the family.
- If your family is concerned about tax considerations, an irrevocable trust will be a more appropriate option. This variety of trust removes the assets from the benefactor’s taxable estate.
Meet with Edward J. McCloskey!
Most importantly, you need to sit down with someone who will give you peace of mind. Planning for a time where you will no longer be around can be a surreal circumstance. An experienced, capable attorney will guide you towards the right answers and get a plan in place that you are comfortable with. If you are ready to discuss Estate Planning options of any variety, contact Edward J. McCloskey by calling 504-267-3122.
