When you are the parent of a child with special needs, the practical and financial challenges can be significant. This underscores the importance of establishing a comprehensive estate plan to secure your child’s future. A common tool found in the average special needs plan is a Special Needs Trust (SNT). An SNT can help ensure the financial well-being of your adult child with special needs without jeopardizing your child’s eligibility for government assistance programs. If you choose to establish a Special Needs Trust, the Los Angeles attorneys at Schomer Estate & Wealth Advisors explain why you may also wish to create a Memorandum of Intent.
Incorporating Special Needs Planning into Your Estate Plan
For most parents, ensuring their children’s financial well-being is a fundamental aspect of estate planning. When your child has special needs, however, an additional layer of consideration is required to provide support while safeguarding your child’s eligibility for crucial government assistance. This entails a more strategic approach than simply making direct gifts, which could inadvertently jeopardize eligibility for benefits.
As an adult, your child may continue to rely on government programs such as Supplemental Security Income (SSI) or Medicaid, any direct gifts of money or assets might impact their eligibility which is determined, in part, on the value of their resources. Gifts, whether during your lifetime or after, could potentially push your child’s “countable resources” beyond the program threshold, causing a loss of benefits. Fortunately, a well drafted estate plan can help.
Understanding Special Needs Trusts
A Special Needs Trust, also referred to as a Supplemental Needs Trust (SNT), is a specialized form of irrevocable living trust designed to allocate assets for “supplementing” government assistance, such as SSI and Medicaid. Assets held within an SNT can be used for expenditures that enhance comfort and luxury that are not covered by government assistance programs. Through a well-crafted Special Needs Trust, you can set aside assets for your child’s benefit without worrying about compromising essential assistance. An added advantage is that other family members can also contribute to the trust, either during their lifetime or as part of their own estate planning.
Using a Memorandum of Intent with a Special Needs Trust
A Memorandum of Intent (MOI), sometimes referred to as a “Letter of Intent,” is an optional complement to a Special Needs Trust. This document allows you to record vital information for the Trustee of your SNT that is not included elsewhere in your overall special needs plan. The Trustee is responsible for determining how and when assets from the SNT are disbursed. As such, the more insight you can provide into your child’s capabilities, routines, preferences, and interests, the easier it will be for the Trustee to make decisions about disbursements.
While an MOI is not legally binding, it serves as an invaluable resource for the Trustee during the administration of an SNT. While it is always helpful for the Trustee of a trust to have relevant information about the trust beneficiaries, it is especially important when the beneficiary has special needs because the beneficiary may not be able to communicate directly with the Trustee.
Along with personal information about your child’s likes and dislikes, you may also wish to include information related to family and medical history, religious beliefs, favored activities, and details about your child’s upbringing along with a section describing important individuals and relationships in your child’s life and another that explains your own hopes and aspirations for your child’s future.
Do You Need Help Creating a Memorandum of Intent?
For more information, please join us for an upcoming FREE seminar. If you need help creating a Memorandum of Intent to be used with a Special Needs Trust, contact the experienced Los Angeles special needs planning attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
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