Parents or others who care about someone with “special needs” (physical or mental challenges) can face special estate planning challenges, as Denis Clifford explains in the book Plan Your Estate. The concern: special needs people often require long-term government assistance, and money and property left directly to them by family members can disqualify them for those benefits.
Special needs trusts
By creating a special needs trust, parents or others can help provide for a person with disabilities without risk of their losing government benefits. Reason – the beneficiary has no legal control over trust assets. Instead, the trustee is empowered to spend money for a wide variety of the beneficiary’s needs that are not covered by federal or state benefits.
The ARC of Indiana is a pooled special needs trust administered by a non-profit organization, combining the assets of many individuals for investment purposes while maintaining individual accounts for beneficiaries. The operative word is for, not to, as the trustees of special needs trusts make payments for goods and services on behalf of, rather than to, the special needs beneficiaries.
“Goods” paid for on behalf of the beneficiary might include clothes, furniture, electronics, pets, appliances, musical instruments, even prepaid funeral expenses, while “services” might include transportation, insurance, entertainment, tuition, repair and maintenance, or even field trips.
INnvestABLE accounts
At Geyer Law, we often work with parents of special needs children. While developing a special needs trust is an important strategy for providing ongoing financial resources for disabled individuals, since 2016, it has been possible to add INvestABLE accounts into the planning.
Similar to 529 College savings Accounts, INvestAble accounts are not taxed if the funds are used for qualified disability expenses. But, unlike the case with special needs trusts, the account holders themselves are allowed to make withdrawals and deposit at will, using funds to pay for goods and services by themselves (on their own behalf).. As is the case with special needs trusts, government benefits are not negatively impacted.
The acronym ABLE stands for Achieving a Better Life Experience. Through the use of special needs trusts, ARC of Indiana and INvestABLE accounts, parents and other loved ones now have a variety of opportunities to enhance the quality of life for disabled individuals in Indiana.
– by Rebecca W. Geyer
