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Estate planning for a special needs child

Whatever the circumstances that resulted in your child's special needs – whether through an accident, birth injury or birth defect – your life may be very different from what you expected. Perhaps you had to move or remodel your Colorado house. You had to radically alter your dreams for your child's future. Your plans to begin setting a little something back for your retirement probably changed dramatically because your attention shifted to providing for the extraordinary needs of your child.

While you devote most of your time and energy to your child, you know you will not be able to do this forever, and at some point, you will no longer be there to meet your child's needs. Your first thought may be to leave your child a substantial inheritance or life insurance benefit that will cover the cost of in-home care, medical expenses, occupational training and whatever other needs your child may have. However, without proper planning, you may create a terrible situation for your child.

Using a trust in your estate plan

If your child is a minor when you pass away, a large inheritance may be a dangerous thing. Without trustworthy oversight, unscrupulous people may take advantage of your child and leave him or her with no resources. Additionally, if your child receives federal assistance from Medicaid, Social Security or other programs, a windfall could disqualify your child from those essential benefits since many of them have asset restrictions.

One useful option is creating a special needs trust. Instead of leaving assets directly to your child, you fund them to the trust and arrange for a trustee to use the assets to supply for your child's needs as you instruct. Some benefits of a special needs trust include these:

  • Protecting your child's eligibility for government assistance
  • Specifying your intentions for the use of the funds in the trust
  • Shielding your child's inheritance and other funds from potential lawsuits against your child or creditors who may wish to levy your child's assets
  • Directing the distribution of excess funds at the end of your child's life

The choice of a trustee for a special needs trust is critical and should not be one you make rashly, emotionally or based on sentimental reasons. In fact, many find that the best way to choose a trustee – as well as a successor trustee in case your first choice is unable to serve – is to seek the advice and guidance of an attorney. An attorney can be an invaluable resource in preparing your estate when you have a special needs child.

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