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Planning for a Family Member Who Has Special Needs


Estate planning for families with a disabled family member involves unique issues. Parents and others who intend to provide for a disabled loved one must consider both continuity of care and financial matters. This article focuses on several issues relevant to planning for a disabled family member.

Nebraska parents are able to make decisions and take actions on behalf of their children until they reach age nineteen, at which time "children" are generally considered legally competent adults. The effect of a child reaching age nineteen is particularly highlighted when the child is disabled and his or her parents are no longer able to freely access health care information or take other actions of legal significance on the child’s behalf. Parents are often confronted for the first time when their disabled child reaches age nineteen with the possibility that it may be necessary for the county court to appoint a fiduciary (a Guardian and possibly a Conservator) to act and make decisions on behalf of their disabled child. The appointed fiduciary could, of course, be one or both parents.

A court appointed Guardian typically makes health care decisions for a disabled individual, decides where the individual will live, and handles the individual’s other day-to-day affairs. It may also be necessary for the court to appoint a Conservator to manage the assets of a disabled individual. In either case, the court has the ability to give the appointed fiduciary either complete or more limited authority to handle a disabled individual’s affairs. The cost of having a Guardian/Conservator appointed is usually around $2,000, and the appointment process takes around four weeks. Once appointed, Guardians and Conservators are required each year to make certain annual filings with the court.

Many disabled individuals (or their court-appointed fiduciaries) struggle with financial planning. These individuals often cannot provide for themselves financially and so must rely on family members and government programs for support. Government programs often play a significant role in providing financial support for disabled individuals. Such programs include state Medicaid, Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), and Veteran’s benefits. State Medicaid, SSI, and Veteran’s benefits are informally referred to as "means-tested" programs because eligibility to receive benefits hinges in part on the other resources "available" to the disabled individual. For example, a disabled individual who owns a savings account containing $200,000 likely would not qualify for benefits under these programs because he or she has other means of support available. Conversely, SSDI is not means-tested, and disabled individuals are eligible for benefits regardless of their other resources, assuming these individuals otherwise meet the eligibility criteria.

In general, individuals with less than several thousand dollars of "countable" assets may be eligible (i) to have state Medicaid pay the cost of certain health care services and (ii) to receive a monthly stipend through SSI. Note that a disabled individual may own certain "non-countable" resources, such as a residence and one vehicle, and still be eligible for benefits. Countable assets exceeding a few thousand dollars must be "spent down" by the disabled individual before he or she will become eligible for state Medicaid and SSI benefits.

Particular attention to this spend-down rule must be given when a person (a "donor") intends to provide for a disabled individual either through lifetime giving or through the donor’s estate plan at death. If countable assets (such as cash or marketable securities) are given to a disabled individual, either through lifetime gifts or at the donor’s death through his or her estate plan, the disabled individual may become ineligible for means-tested benefits and may be required to spend substantially all of the gifted assets before regaining eligibility. In essence, a donor who gives assets to a disabled individual may in effect be making an indirect gift to the government, which may well be contrary to the intent of the donor.

A helpful alternative for a person who desires to provide for a disabled individual is to channel gifts into a Trust created for the benefit of the disabled individual. Trusts are a vehicle for assets to be held (and expended) in a way that supplements the disabled individual’s lifestyle while allowing him or her to remain eligible for means-tested government benefits without having to spend-down countable assets. Additionally, Trust assets would be managed, protected, and expended by a responsible person or entity who serves as the Trustee of the Trust. If the disabled individual dies before all Trust assets are expended for his or her benefit, then the remaining Trust assets would be handled according to the terms of the Trust document, which could include distributing them to the surviving siblings of the disabled individual or to other beneficiaries. In summary, use of a properly designed Trust allows a person to provide for a disabled individual in a way that maintains the disabled individual’s eligibility for government program benefits while supplementing his or her lifestyle with items or services that would not otherwise be provided to the disabled individual through such government programs.

Contact a member of our Estate and Business Succession Planning group if you are interested in learning more about how to plan for a family member with special needs.

by James A. Tews


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