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Blog

Special Needs Trust

• IMPORTANT REPORT EVERY SPECIAL NEEDS FAMILY MUST KNOW ABOUT ESTATE PLANNING
• Planning for your autistic child’s future can bring peace of mind
• Five estate planning mistakes made by parents with special needs children
• Could you benefit from a Special Needs Trust?

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News

• Many special needs children lack plans for lifetime of care...
  Posted on 4/17/2009
• Importance of Special Needs Trusts Highlighted by Non-Profit...
  Posted on 3/4/2009

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Library

Special Needs Trust

• Part 11 of 12 - Facts Every Special Needs Family Must Know About Estate Planning
• Part 12 of 12 - Facts Every Special Needs Family Must Know About Estate Planning
• Part 9 of 12 Facts Every Special Needs Family Must Know About Estate Planning
• Part 7 of 12 - Facts Every Special Needs Family Should Know About Estate Planning
• Part 8 of 12 - FACTS EVERY SPECIAL NEEDS FAMILY MUST KNOW

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Part 7 of 12 - Facts Every Special Needs Family Should Know About Estate Planning

Fact # 7 – Understand what a will does and does not do.

A will is a written legal document, signed by an individual that determines who gets his or her property after his or her death. If you do not have a will, state law determines who receives your property. A person who dies without a will is said to have died in testate, and the property passes by intestacy.

Each state has its own intestacy law. In Pennsylvania, if you die before your spouse and children, your spouse will get a share of your estate (specified by statute), and the remainder will be distributed equally among your children, regardless of whether they have disabilities or are minors. If you die after your spouse, but before your children, your property will be split among your children equally. Again, this can leave a substantial sum of money directly to your special needs child and jeopardize his or her eligibility for benefits. Because of the problems that can be caused by intestacy, it is important for you to have a will.

For a will to be valid, it must be executed – signed, and usually witnessed, according to formal procedures required by law. You should consult with a lawyer when you plan to draw up a will.

You can change your will at any time prior to your death, following strict procedures required by law. To make certain that the procedures are followed correctly, you should not change your will without the aid of a lawyer. You should review your will every time there is a marriage, death, birth, adoption, or divorce in your family to verify it still meets you needs.

Your will should name an executor of your estate. (A female executor is sometimes called an executrix). The executor is responsible for collecting and maintaining the property, paying the debts of the estate out of that property, and, under the supervision of the Orphan’s Court, distributing the property in accordance with the will. The Court will appoint as executor whomever you name in your will. You can appoint one or more individuals, or corporate entities, such as banks, to be your executor(s). Once the estate is distributed, the executor’s job is over.
There are several ways you can treat a special needs child in your will. Keep in mind that whether or not you have a will, your estate will have to go through a court supervised probate process.

Not all property is distributed according to the provisions of a will. In fact, it is quite common for a large percentage of your property to be transferred without regard to your will.

For example, any property that you jointly own with another person (Bank accounts, real estate, etc.) may be subject to the “right of survivorship.” This means the property automatically belongs to the other person upon your death, regardless of any provisions in your will. Similarly, any bank account or other property you hold “in trust for” another person will
automatically belong to that person on your death. If you have concluded that leaving substantial cash outright to your child because of the potential loss of benefits described above is undesireable, you should avoid establishing joint accounts with your special needs child or “in trust for” accounts with your special needs child as a beneficiary.

Life insurance benefits also do not pass under your will, but instead are distributed in accordance with the terms of the life insurance policy to the named beneficiary. Therefore, naming your special needs child as a beneficiary of your life insurance has the same effect as making a direct gift to him or her, and may need to be avoided in order to preserve eligibility for government benefits. As alternatives, you can name beneficiaries with instructions that they use the insurance for your special needs child (see the section on Morally Obligated Gifts, below), or you can create a trust for the benefit of your special needs child that includes the insurance proceeds (see the section on Trust, below).

Retirement plan proceeds such as IRA’s, 401k, 403B, SEP’s etc. also pass directly to beneficiaries. These assets can also cause income tax issues when distributed to a beneficiary. Therefore, you must carefully coordinate beneficiary designations making sure they are properly integrated with your comprehensive estate plan.

questions

Special Needs Trust

• Is there a difference between a special needs trust and a supplemental needs trust?

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