Planning for Children with Disabilities
You may have been told, by well meaning, but probably not well informed friends, that you have to completely disinherit a child with a disability if you want public benefits to be available to him or her. This half-truth denies many children substantial benefits. This difficulty becomes especially acute when, with the infusion of additional resources, your child's living conditions could be vastly improved. New techniques and therapies are constantly evolving. Medicaid and other similar programs do not pay for the “extras” that can enhance your child’s quality of life. If publicly funded" programs will not pay for this care, your child could lose a lot more than mere monetary benefit.
Properly planned and drafted Special Needs Trusts can maximize your child’s opportunities.
Using a Special Needs Trust
Assets that you leave outright to your child may be "wasted" because they are a "disqualifying resource" for purposes of programs such as Medicaid. If a trust provides that the trustee may distribute assets for your child's "support" the Medicaid rules provide that the trustee's discretion will be deemed to have been exercised to the maximum possible extent so that, in effect, the trust will be paying for expenses which otherwise might have been provided through entitlement programs.
With a conscientiously designed Special Needs Trust, assets may be available for your child's medical care, educational and vocational opportunities and for clothing and entertainment while preserving his or her benefits. The important point in designing these trusts is to state explicitly and unequivocally that the trust assets are only for to provide for your child’s needs not paid for under public programs. If a Special Needs Trust is carefully drafted, there is a good chance that, under current Connecticut law, the assets would not be a "disqualifying resource."
"Self Destructing" trusts: Suppose that the trust, however well thought through, is held to either disqualify your child from receiving entitlement benefits or must have its assets distributed to a government agency? It might be possible to have the trust "disappear" if it were successfully attacked. We could, for example, provide for an alternative distribution to your other children or family members or to charities in certain specific circumstances.
NOTE: Although there are several Connecticut Supreme Court cases which seem to validate the use of discretionary trusts and although the "self destructing" trust seems to be "blessed" under principles of general trust law, their success is not guaranteed. Perhaps to a greater extent than in the more traditional areas of estate planning, extreme care must be given to the details of planning and drafting in order to try to achieve the optimum result.
Choosing Trustees
Both "professional" and "family" trustees have their strengths and weaknesses. Corporate trustees have access to professional investment advisors, maintain excellent records and are generally conversant with tax principles. On the other hand, administrative officers may have little or no background in dealing with beneficiaries with disabilities and may, even with the best of intentions, have such a great workload that they cannot provide adequate personal attention. Individual trustees generally have no tax or investment background but are very close to the beneficiaries and recognize their needs and potential.
When planning a Special Needs Trust, you might wish to consider using a corporate trustee and a family trustee. These provisions have to be drafted carefully to separate the Trustees’ duties. If two or more trustees are serving, they normally have to cooperate on every decision. A trustee selected for its investment expertise may have to deal with questions of your child’s day to day care. Conversely, a family trustee may be called upon to participate in investment decisions. With very careful drafting, we can allocate duties and liabilities between co-trustees. Another possibility is to have someone serve as a "consultant" to the trust, without actually being one of the trustees.
Conclusion
If your child has special needs, the "normal" estate planning process becomes substantially more complex. There are no generic Special Needs Trusts. There is no such thing as “one size fits all.” They have to be carefully planned and structured considering your child’s unique needs and abilities.