ARTICLE: Smart Ways to Protect Assets for Loved Ones with Special Needs

Smart Ways to Protect Assets for Loved Ones with Special Needs

Protecting assets for children or beneficiaries with special needs involves several key strategies to ensure that the beneficiaries’ financial security and eligibility for government assistance programs are not compromised. Here are some common approaches:

Special Needs Trusts (SNT)

An SNT is a legal arrangement that holds assets for the benefit of someone with disabilities, ensuring they don’t directly own the assets. This helps preserve their eligibility for government benefits such as Supplemental Security Income (SSI) and Medicaid.

There are two main types: Third-Party SNTs, funded by someone other than the beneficiary (e.g., parents or relatives), and First-Party SNTs, funded with the beneficiary’s own assets (e.g., from an inheritance or settlement).

The trust is managed by a trustee who has discretion over distributions, ensuring funds are used for the beneficiary’s needs without disqualifying them from benefits.

ABLE Accounts

Achieving a Better Life Experience (ABLE) accounts allow individuals with disabilities to save money without losing eligibility for SSI, Medicaid, and other public benefits. The beneficiary must have been diagnosed with a disability before age 26.

Contributions are made with post-tax dollars, and the earnings grow tax-free. Withdrawals for qualified disability expenses are also tax-free.

Guardianship or Conservatorship

For beneficiaries who may not be able to manage their own finances due to their disability, establishing a guardianship or conservatorship may be necessary. This involves a court process where a guardian or conservator is appointed to make financial (and sometimes healthcare) decisions on behalf of the person with special needs.

Letter of Intent

Although not a legal document, a letter of intent provides guidance about the beneficiary’s care, preferences, routines, and other important information to future caregivers or trustees. It’s a valuable tool for ensuring continuity in the care and management of affairs for someone with special needs.

Life Insurance

Life insurance can be used to provide for a child or beneficiary with special needs. The policy can be structured to pay out into a special needs trust, ensuring the funds are used appropriately for the beneficiary’s care and support.

Estate Planning Considerations

When planning an estate, it’s crucial to avoid leaving assets directly to a beneficiary with special needs, as this could disqualify them from government benefits. Instead, assets should be directed to a trust or other planning tool designed for special needs.

Protecting assets for beneficiaries with special needs requires careful planning and consideration of the beneficiary’s specific situation and potential future. For personalized guidance and to ensure that your plans align with legal requirements, Roth Elder Law can help. We can assist with navigating the complexities and provide peace of mind that your loved one’s financial future is secure. Call us at 607-962-6162 or complete this intake form and we’ll be in touch to schedule a meeting.

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We at Roth Elder Law, PLLC, believe in providing services in a way that clients can easily understand and meaningfully participate in designing and maintaining their estate plan for their loved ones, as well as be assured that their plan will be administered according to their wishes.