Estate Planning for Beneficiaries With Special Needs

Children with special needs can be cherished members of any family. But part of providing care requires an estate plan that acknowledges that person’s extra challenges.

Many families care for a loved one with special needs. In the United States, close to 10 million children have some form of special health care issues that require extra care.

Meanwhile, one in five adults struggles with mental illness or addiction. If one of your loved ones has been battling with their mental health, you may be unsure how to provide for them. When planning for beneficiaries with mental illness or addiction, you have to plan carefully. 

Though you want to provide for your beneficiaries, you also understand that they may need help managing their money. Thankfully, there are plenty of options.

Nothing To Be Ashamed Of

As noted, special needs because of developmental disabilities, autism, mental health issues and even and addiction are incredibly common. It leads to more difficulties in life, and can make a person less fiscally responsible. You may have reservations about leaving your beneficiary a lump sum, and that's okay. 

The first step is to finish reading this article, of course. But after that, call an estate planning attorney. More particularly, an estate planning attorney who is well versed on planning for beneficiaries with special needs.  

The main takeaway is that if your family has a loved one with special needs, don’t wait to get a proper plan in place.

Staying Fair When Estate Planning

If you have multiple beneficiaries, your first instinct may be to divide assets equally. Though this approach works for some families, having a loved one with special needs can complicate things.

So let's get this out of the way: equally is not always the best plan for every family. What does matter is that you have to plan fairly. This may mean setting limits on how much money a beneficiary can receive, or assigning a trustee to manage the finances of an heir with challenges. 

You may not have to set these same limits for your beneficiaries without special needs, addiction or mental health difficulties. That's okay. Planning your estate means making sure your loved ones are safely provided for, and that may look different for every family. 

Planning For Beneficiaries Who Struggle

Giving your beneficiary a huge amount of money seems easy enough. However, consider the risks of giving so much money to a struggling person. A loss of benefits that the heir is already entitled to is a common result. Medicaid, social security disability payments or survivor benefits, special food and housing benefits, and other income could be lost because of a poorly planned estate by a well meaning parent. In the worst-case scenario, a windfall could end in death in some with drug and alcohol addiction issues. 

Many people with special needs, or those who struggle with substance abuse or mental illness can often function in everyday life. But they can also get so sick that they are unable to advocate for themselves. If your loved one is prone to impulsive behavior and bad spending habits, look into a special needs trust. 

Special Needs Trusts

Special Needs Trusts (sometimes called discretionary trusts, supplemental needs trusts or special purpose trusts) , are a great option when planning for beneficiaries with mental illness or addiction. When setting up a special-purpose trust, you will assign a trustee that will manage your beneficiary's money. 

The trustee's job is to make sure the beneficiary is of sound mental or physical state to receive money. They will step in if the beneficiary is incapacitated or otherwise unable to make sound decisions.

You can also provide specific instructions to the trustee. You can mandate that the money can only be accessed after a certain period of sobriety, or that the money must go towards therapy. You can discuss these options with an estate planning attorney. 

Make Sure Your Loved Ones Are Cared For

Planning for beneficiaries is difficult, no matter what. Making sure your loved ones are taken care of despite their special needs is even harder. Thankfully, you can keep your beneficiary safe and financially stable with a special needs trust. 

If you have any questions about estate planning, give us a call. We specialize in estates and trusts, and offer plain english, compassionate legal help at all times. Don't hesitate to contact us.