Imagine what would happen if a student graduated from high school and wanted to go to college. Late August rolls around, and his or her friends are packing into cars to go to their first day of undergraduate studies. However, the student in our example has not purchased books, arranged for a dorm room, chosen classes, or even sent in an application for the school of their choice. What happens to them? They don’t go to school unless it’s late registration at a community college, and it may not even have the classes the student wants. While the community college may be great, the reality is that he or she had no choices because they did not plan ahead. People that plan ahead get choices and options.
Parents of special needs children want their children to be provided for, but they want more than just a basic existence. They want their child to look forward to something, even if it is as simple as a day at the park on weekends, a steady supply of new magazines and books, and some more simple comforts. However, these are completely out of reach if a child has no funds, and the federal government makes sure a person has very few funds in order to qualify for most assistance programs. Those items are out of their reach if their parents failed to take the steps necessary to provide for them.
However, there are steps parents can take to make sure that their child is taken care of after they are gone. More importantly, there are ways to do this without giving up control of their destiny to a total stranger, corporation or government bureaucracy.
One technique of providing for your child without disqualifying them for government assistance is fairly simple to understand, and one variation or another is probably right for most special needs children. A trust prepared by a qualified attorney is established to hold funds on the child’s behalf, and an life insurance policy of one kind or another is purchased on the life of a parent or the parents to place money into the trust after death. A trustee of the parent’s choosing is named to make financial decisions for the child, but the child has no right to the money—it is entirely within the trustee’s discretion whether or not funds can be used. This type of trust is sometimes called a Medicaid Exemption Trust.
The emphasis above is on the word “right.” If the child has any right to demand money, then most federal regulations state that all of those funds must be used to pay for assistance before the government will step in and provide for the basic maintenance of the special needs person. However, the trustee can spend money in a variety of ways that does not violate federal regulations. Money can be spent to take the special needs beneficiary to the movies, transport relatives to visit the child, pay for elective surgery or medications not covered by Medicaid, swimming lessons or lease equipment in the name of the trust that the beneficiary can use. These items do not currently disqualify a special needs person from federal assistance because it does not place any property in their name or make assets available to them for their unfettered use. A properly drafted Medicaid Exemption Trust clearly states that the beneficiary is not entitled to funds, and the trustee must make expenditures that do not disqualify the beneficiary from assistance.
What is most important for many people is that the people they trust are still in charge of the funds they left behind for their loved one. There are some group plans that offer trust planning services for special needs parents, but the corporation typically assigns itself as trustee in order for the parents to participate in the program. In other words, the trust company handles the money, the trust company decides who provides services, the trust company decides what extras the beneficiary receives, and the trust company decides how funds are invested. While this may be good for some people, most parents prefer to have people they trust make these important decisions. Their brother or sister, another child, or a close family friend are common examples of people appointed as trustees.
A common misconception is that a trustee must also be in charge of the special needs person’s daily care. However, just because someone is placed in charge of the funds does not mean that they are responsible for the constant care of the special needs child without help. In many cases, the special needs person resides in an assisted living facility paid for through government assistance programs, and their basic, daily needs are handled through their home. It is the added necessities and comforts that the trustee can authorize and oversee.
There are certainly better options than simply giving everything over to a corporation or allowing all funds to be used up before government assistance will help. A Medicaid Exemption Trust may be the best option to plan for your special needs child’s future, and it should be considered part of an effective overall estate plan prepared by an attorney experienced in this field.
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