Special Needs Require Special Planning

Our vision at First Citizens Bank is to inspire financial well-being for everyone.  We use the term “financial well-being” to refer to your comprehensive financial health.   Preparing for the future when you won't be here to care for your family is a challenge that all parents face. But as the parent of a child with special needs, your estate planning is especially complex. Our Trust Officers have experience working with families to provide peace of mind in navigating the complexity and both establishing and implementing a plan to care for your special needs child after you are no longer able to do to so. 

Why is estate planning important when you have a child with special needs? 

Your will, and other estate planning documents, must address the unique circumstances in planning for a special needs child such as: 

• Providing for adequate lifetime care assistance. 
• Managing financial affairs for your child as they become an adult. 
• Navigating eligibility for government benefit programs. 
• Staying informed about changes in the law that may impact the plan. 
• Organizing and advocating on behalf of your child when you are no longer here. 

Parents of children with special needs must make careful estate planning decisions to coordinate all their child’s legal, financial, and special care needs – both now and in the future. We work closely with your attorney and other professionals to assist you in not only developing a plan during your lifetime but also implementing the plan after you are no longer here. 

What planning tools are available? 

There are several types of trusts to assist with special planning circumstances. Below is a quick summary of just a handful of the legal documents you might consider in your plan: 

Wills: A will is always part of an estate plan. It ensures that your money and property are distributed according to your wishes upon your death and allows you to select a guardian for your child. Without a will, probate assets will pass according to the laws of intestacy, which generally assign a portion of the assets to the surviving spouse and a portion to the children. If your child requires more financial resources than other beneficiaries, it's especially important to prepare a will that reflects your wishes.  Check out our blog on Estate Planning in 2021 for more information on basic estate planning.

Beneficiary designations:  With certain assets often referred to as “non-probate” assets (such as life insurance policies, retirement plans, and annuities), you must designate beneficiaries and/or contingent beneficiaries. You'll also name beneficiaries under your will. While your first inclination might be to name your child with special needs outright as your beneficiary, caution must be taken not to jeopardize their entitlement to government benefits.  

Guardianship & Conservatorships: Although you are the natural guardian of your child with special needs during your lifetime, who will care for your child after your death? Selecting a Guardian who can act on your child's behalf after you die is one of the most important decisions you face. A Guardian ensures the protected person is cared for properly.  Often, this person is not the same person you name as Conservator.  A Conservator manages financial affairs of the protected person.  The role of Conservator of a special needs individual can be quite complex in light of navigating changes laws and governmental benefit programs.  Our team is experienced in serving in this role and coordinating closely with a Guardian.   

Please note, the law does not assume an adult with special needs is incapable of handling their own affairs. After reaching the age of majority (generally age 18), your child is a legal adult. They will be judged capable of handling their own affairs unless declared incapable by a court.  

Support Trusts:  Support Trusts require the Trustee to make distributions for the child’s support in areas like food, shelter, clothing, medical care, and educational services. Beneficiaries of Support Trusts are not eligible to receive financial assistance through Supplemental Security Income (SSI) or Medicaid. If your child will require SSI or Medicaid, you should avoid a Support Trust.  Our Trust Officers are experienced in administering this type of trust as Trustee.  We give families peace of mind knowing the discretionary distributions decisions will be made professionally and consistent with the requirements set forth in the trust document as well as consistent with the law.   

Special Needs Trusts:  For many parents, a Special Needs Trust can be an effective way to help their child.  A Special Needs Trust manages resources while also maintaining the child’s eligibility for public assistance benefits. 

There are two types of Special Needs Trusts: 

Third-Party Special Needs Trust:  Created using the assets of the parent(s) as part of an estate plan; distributed by a Will or Living Trust. 

Self-Settled Special Needs Trust: Generally created by a parent, grandparent or legal guardian using the child’s assets to fund the Trust (e.g., when the child receives a settlement from a personal injury lawsuit and will require lifelong care). If assets remain in the Trust after the child’s death, a payback to the state is required, but only to the extent the child receives public assistance benefits. 

Special Needs Trusts are a critical component of your estate planning if you have loved ones with disabilities for whom you wish to provide after your passing. Generally, Special Needs Trusts are either stand-alone trusts funded with separate assets or they can be sub-trusts in living trusts. Note the laws are constantly changing and it is important to be sure to review these complex planning tools regularly.   

Planning for your loved one with special needs requires extensive research to become a well-educated advocate. Navigating the latest medical, educational, financial, and legal changes can be quite overwhelming.  Our Trust Officers at First Citizens Wealth Management can bear some of the weight by helping you navigate the financial and legal challenges now and in the future. Give us a call at 641-422-1600 or email us at wealth@myfcb.bank.