Estate Plans Involving Disabled Children

Posted on Jan 24, 2018

A parent of a disabled child typically faces special estate planning concerns and decisions. One of those special concerns usually relates to how an inheritance can be left to the disabled child while also preserving the child’s present or future eligibility to receive government benefits from means-tested “welfare” programs, such as Medicaid and Supplemental Security Income. Frequently, specific planning vehicles should be considered in such a situation, including an “ABLE” account and a “third-party special needs” trust. Generally, an “ABLE” account is a tax-advantaged cash savings account set up and owned by the disabled person (but contributed to by others), where the funds can be saved and then later spent on “qualified disability expenses.” A “third-party special needs” trust is a legal trust typically set up and funded by the disabled child’s parent(s) and other family members in order to supplement government benefits receivable by the disabled child. Both of these planning vehicles, if established and administered correctly, generally allow a certain level of funds to be held and spent for the benefit of the disabled child without disqualifying the disabled child from receiving means-tested government benefits.

It is important to recognize that, while they have the same general purpose, ABLE accounts and third-party special needs trusts have different complexities and legal requirements. A parent with a disabled child will likely want to examine the advantages, limitations and restrictions of each planning vehicle in order to determine which is best under the circumstances. In some cases, the parent may find that having an estate plan that combines both an ABLE account and a third-party special needs trust is ideal. I have experience guiding parents of disabled children through these decisions and in setting up these kinds of estate plans.

For more information on this topic, please contact the author, John Collins, by phone at 812.424.7575 or by e-mail at jcollins@zsws.com.

 

Posted on Jan, 24 2018