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July 3, 2016

Special Needs Estate Planning

Parents of a child with special needs (developmental disabilities, mental illness, autism, severe physical handicaps) must use extra care in their estate planning. Whenever that child will need to receive need-based government benefits, such as Medical Assistance (Medicaid [M.A.] or Title XIX) or Supplemental Security Income (SSI), the parents’ estate plan must not block their child’s eligibility. M.A. pays for the child’s medical and residential costs. SSI is a monthly cash benefit that also helps to pay the child’s costs.  “Need-based” means the child’s total asset ownership cannot exceed $2,000 and his/her income cannot exceed a total that varies with the facts of each situation (usually approximately $800 per month). 

Parents want all of their children to be included in their estate plan and benefit from inheritance. This can be done by transferring the special child’s share of the parents’ estate assets to a Special Needs Trust. The child will be included in the parents’ estate plan and still be eligible to receive the government benefits that pay his/her medical and residential costs and provide helpful monthly cash. The Trust, not the child, owns the inherited assets and the Trustee of the Trust can control income distribution to maintain the child’s eligibility.  The key test for any Special Needs Trust is that the special needs child has no personal authority to reach and control the assets inside the Trust. The Trust assets are not, therefore, “available” to the child. The Trustee has discretion and absolute authority. 

When the special needs child dies, the Trust states where any remaining assets will be distributed – often to siblings of the special child. If assets in the Trust resulted from the special child’s accumulated work efforts or were a personal injury recovery, then Wisconsin or any other State which has provided government benefits to the special needs child will have a lien to be reimbursed out of any assets remaining in the Trust at the child’s death.  Eight to ten percent of all families have a child or other dependent person who needs to receive, or ultimately will need to receive, Medical Assistance and SSI. Give those families that you know a copy of this article. The Special Needs Trust is the answer to a problem they did not know how to solve.

Attorney John A. Stocking, Petrie & Stocking S.C.

John A. Stocking is the father of six children, including a 52-year old son with Down Syndrome. John has practiced law at Petrie & Stocking S.C. for 48 years and concentrates his practice in estate planning for families with a disabled loved one. 

John graduated from Yale University and the University of Wisconsin Law School. He has been Chairman of the Curative Care Board of Trustees and a member of the Curative Foundation. 

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