Legislative Concerns for Special Needs Planning

Parents must often consider how best to plan for their special needs child. They must ensure that their loved one will always have a place to live, as well as future financial stability. In essence, parents must find a way to provide for the unique needs of their child at their death. This requires a plan with flexibility for unforeseen changes.

Fortunately, Congress has made this planning easier with legislation that authorizes a tax-deferred savings account for children with special needs. Much like special needs trusts, these accounts are not counted for government assistance program eligibility. When loved ones contribute to their account, special needs individuals can still receive assistance from programs like Medicaid. While these accounts are limited to $100,000, those who cannot create a Special Needs Trust should consider this viable alternative.

In addition, Congress has made it easier for special needs children to receive Veterans benefits. Previously, any income that a special needs child received from the Veteran’s benefits of a loved one was counted against them, often precluding them from government assistance program eligibility. Now, special needs children can receive these benefits while remaining eligible for government assistance programs.

Finally, Congress should consider changing special needs trust regulations. There are two types of special needs trusts: first party and third party trusts. Third party special needs trusts allow a parent or grandparent to create a trust for a special needs individual. A first party special needs trust (also known as a D4A trust) allows a grandparent, parent, or the court to create a trust on the behalf of a special needs child when he or she receives money directly. This often occurs when a special needs individual receives an inheritance or a personal injury settlement. If the child actually receives the money, he or she will be disqualified from critical government benefits programs.

Unfortunately, the one person who can’t create this trust is the child. This can be problematic if his or her parents and grandparents are deceased. While the court can create a trust on the child’s behalf, the process is often expensive and time consuming. Once created, the trust restricts expenses and implements a payback provision. At the child’s death, money left in the trust must be paid back to the state in return for support provided by the state for the child. Consider encouraging your Congressman to vote for legislation that will allow individuals to create their own D4A special needs trusts.

If you or your loved ones have questions about special needs planning, consider W.G. Alexander & Associates – we are experienced attorneys who offer a unique blend of asset protection, Elder Law and estate planning. You can also attend our free seminars, learn more through our website at www.wgalaw.com, or call us at (919) 256-7000.

Attorney Bill Alexander discusses these issues and more every Tuesday morning on W.G. Alexander & Associates’ radio program, “Asset Protection Today,” on TalkRadio 850 WPTK (AM). Be sure to listen from 9:00-10:00 AM.