If you had to guess the largest minority group in America, what would you say? The Department of Labor states that as of January 2016, people with disabilities make up the nation’s largest minority, counting almost 50 million individuals.
For families affected by disability, especially physical and developmental, the care needed can be daunting – on physical, emotional and financial levels. While many government programs exist to aid these individuals, they still fall short in most cases and, in the current economic environment, face budget cuts.
The simple truth? It is vitally important for these families to have the necessary legal documents and financial planning in place. The cornerstone of such a plan can be the Special Needs Trust.
- It provides care above what the government alone can supply. Special Needs Trusts, sometimes called Supplemental Needs Trusts, have existed for years. However, in 1993, Congress specifically authorized the use of Special Needs Trusts for the benefit of disabled individuals under the age of 65.
The assets in a Special Needs Trust are not countable when it comes to qualifying for government assistance. This is because the Trust is designed to provide “supplemental and extra care over and above that which the government provides.” As a result, how assets held in trust are used must be carefully managed in order to not jeopardize available government assistance. It is often noted that the Trust should operate on a sliding scale, providing benefits to whatever extent they are not covered by government aid. If not properly executed, some or all government benefits could be forfeited. - It protects the funds and the individual, alike. Assets in a Special Needs Trust are not subject to creditors or judgment in a lawsuit. The assets remain protected both for and from the individual with disabilities, dispelling the notion that the individual with disabilities is an easy target with “deep pockets” in the form of the Trust.
- It can be the planning tool of choice for families affected by disability. Because of these reasons, the Special Needs Trust can be the estate planning tool of choice for families of an individual with disabilities. However, it is critical that the Trust be established correctly. This is done by meeting with an attorney who is very familiar with, and maybe even specializes in Special Needs Trusts.
- Trustees and caregivers must be appointed.With such a great tool comes very specific legal and financial considerations to be made. As with any trust, a trustee must be appointed to oversee the assets held, often a parent or guardian of the individual with the disability. However, a growing concern for many is that due to improvements in treatment and care, the individual with the disability may outlive their parents.
Separately, a caregiver must also be appointed. Again, this is typically one or both parents, but it is important to note that every individual, regardless of ability, is deemed to have the legal rights of an adult over the age of eighteen. This means that even the individual’s parents must petition the court in order to be named a lifetime guardian. However, in the instance that the individual with the disability should outlive their parent and/or current guardian, alternative, viable caregivers should be named.
Having separate individuals serving as trustee and guardian can provide a system of checks and balances, ensuring the proper care, both physically and financially for the individual with disability/special needs.
- A Letter of Intent should be considered. Another important document to have in place aside from the Will and Trust is a Letter of Intent. This provides all the necessary information and instructions for the caregiver including doctors, prescriptions and other medicines, routines and schedules, exercise, contacts, etc. While the information directly pertains to the caregiver, it’s also important that the trustee is aware of the letter’s content.
It goes without saying that caring for an individual with disability and/or special needs requires considerable effort. It is equally important that proper steps be taken to help ensure a high-quality level of care – both physical and financially – can be sustained for the duration of the individual’s life.
If we at Kemp Harvest Financial Group can help you in any way, please feel free to contact us.
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Securities and investment advisory services offered through National Planning Corporation (NPC), NPC of America in FL & NY, Member FINRA/SIPC, and a Registered Investment Adviser. Registered Representatives of NPC may transact securities business in a particular state only if first registered, excluded or exempted from Broker-Dealer, agent or Investment Adviser Representative requirements. In addition, follow-up conversations or meetings with individuals in a particular state that involve either the effecting or attempting to effect transaction in securities, or the rendering of personalized investment advice for compensation, will not be made absent compliance with state Broker-Dealer, agent or Investment Adviser Representative registration requirements, or an applicable exemption or exclusion. Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Kemp Harvest Financial Group® and NPC are separate and unaffiliated companies and are independently owned and operated. NPC does not render tax or legal advice. NPC PRIVACY POLICY. NPC # 103562 01/18
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