Increased life expectancy has made estate planning more complex. This is especially true for parents of special needs children. For example, a person with Down Syndrome has a life expectancy of about 60 years of age compared with only 25 in 1983. As discussed in a Wall Street Journal article titled, “Financial Help for Parents of Special Needs Children”, estate planning for parents of special needs children is particularly challenging as they want to ensure their disabled children will be cared for when they are gone.
The most common estate planning solution is a special needs trust. In order to receive government benefits like SSI or Medicaid, a disabled individual can generally have no more than $2,000 in countable assets. Setting up a special needs trust can allow parents to leave more money for the care of their child without making them ineligible for government benefits. It is, however, important to establish a special needs trust before any inheritance is received.
Another estate planning option is a 529 ABLE Account. These accounts are similar to 529 college-savings plans and allow for tax-free distributions as long as the money is spent on qualifying expenses such as housing, employment training and assistive technology. These accounts are relatively new and it is important to check with a qualified elder law attorney to see if they are allowed in your state and what the specific rules are. Most ABLE accounts can hold up to $100,000 without jeopardizing benefits and work best as a supplement to a special needs trust.