As if the job of being a caregiver for a special
needs child is not difficult enough on its own,
Baby Boomers often find themselves becoming dual
caregivers for both their children and their own
They may have to provide constant care and
attention to their children even after they reach
adulthood; while their parents are probably facing their
own set of challenges as they grow older.
At a certain point, the caregiver will likely
have to assist their parent with the same set of issues
that they have to face with their child with special
needs, namely how to pay for essential services while
securing medical care and affordable housing, and simply
providing the love and attention they need.
This dual caregiver relationship is never easy,
but for parents of children with special needs, planning
for their own long-term elder care is essential because
very often the special needs child will be unable to
provide the necessary assistance.
for your own long-term care when you have a child with
special needs requires a delicate balancing act between
establishing your own financial position to ensure a
comfortable retirement and making sure that your child’s
needs are protected, both while you are alive and after
you are gone. Most parents of children with special
needs will immediately think of what they should do to
protect their children’s future before concentrating on
their own needs. However, there are ways for parents to
accomplish both goals at once, through careful estate
and special needs planning. By working with a
well-qualified attorney and financial planner who
specialize in helping families with special needs, a
caregiver can establish a child’s security for life,
while making sure that she will be well cared for when
the parent needs his own cane to lean on further down
first part of this series, we explore the tools
available to parents of special needs children to
provide for the long-term medical care, housing, and
financial assistance the children will require
In the two parts to follow, we will explore the
tools available to parents looking to secure their own
long-term needs into and beyond retirement, and finally
take a look at how to balance these long-term needs of
parent and child throughout their lives.
course of her lifetime, the person with special needs
requires a host of services, including medical care,
housing, job training, and financial assistance.
Various government programs can provide a broad
spectrum of services designed to aid an individual with
These programs range from very comprehensive
(like Medicaid and Medicare) to very specific (like
computer training and specialized housing), but most
have one thing in common — the beneficiary must fall
below some predetermined income or asset level, or both.
Fortunately, planners have developed a very
important instrument that can hold funds for a child’s
future needs while allowing them to qualify for many
types of public benefits.
These tools are called “supplemental” or
“special” needs trusts because they are designed to
“supplement” any benefits a person with special needs
may receive from the government.
Supplemental needs trusts are one of the most important
parts of a parent’s estate plan because they allow
maximum flexibility to manage a child’s care during
every stage of her development.
Typically, when you think of leaving an
inheritance, you picture a dusty law office, the opening
of a cracked will, and bingo - everyone gets their
parents of children with special needs, however, it is
imperative that the share meant for the child with a
disability flow directly into a supplemental needs trust
in order to protect the child’s benefits.
A qualified attorney can correctly set up your
will to accomplish this.
the trusts contain the appropriate language, funds from
a retirement plan or life insurance policy, not just
from a parent’s probate estate, can flow directly into
the trust when a parent passes away, avoiding a
potential loss of benefits should the child receive the
Furthermore, trusts allow parents to make their
intentions and caregiving goals clear.
While a trustee must have independent discretion
to distribute the funds to or for the benefit of the
person with special needs, the trust can outline the
child’s needs, the parent’s wishes, and can even include
a special group of family friends and relatives called
trust advisors who consult with the trustee on matters
related to the beneficiary’s care.
In other words, trusts are incredibly flexible
and must be included in any responsible estate plan.
There are two main types of
first, called a third-party trust, can be set up by any
family member for the benefit of the person with special
contributed to this trust are used to pay for additional
care and services for a beneficiary, and are not
considered the beneficiary’s assets for purposes of
determining eligibility for government benefits. Theoretically, a parent or grandparent could
deposit millions of dollars into a third-party
supplemental needs trust and their child or grandchild
would still qualify for benefits if necessary (although
in this case, using the funds to provide superior
private health insurance or housing may be a better
second type of trust is called a first-party or
The key difference between a first-party trust
and a third-party trust is that the former is designed
to hold a beneficiary’s own assets, not funds donated by
though the trust is designed to hold the beneficiary’s
own funds, due to a quirk in federal law, the trust must
be created by a parent, grandparent, or a court - the
beneficiary cannot do it. These trusts are typically used when someone with
special needs receives a large accident settlement or
inheritance in her own name, or when someone who had
been healthy and working becomes disabled through an
injury or illness. While depositing funds into a first-party trust
will allow a person to qualify for government benefits,
the trust must provide that if any money remains in the
trust when the beneficiary dies, it must first be used
to reimburse the state for Medicaid paid out on the
beneficiary’s behalf. If funds remain after such reimbursement, they
can then go to other family members.
Because of this provision, parents or other
relatives of a person with special needs should never
leave money directly to a beneficiary - they should
establish their own third-party trust to hold the funds,
type of trust is the right one to set up?
The third-party trust is important because you
can place funds into it while alive, and through your
will, life insurance policies and retirement accounts
when you pass away, and the funds can be used without
fear of government reimbursement.
As for a first-party trust, since only a parent,
grandparent or court can create it, we recommend
creating one at the same time as the rest of your estate
this ensures that the trust is available if or when your
child comes into his own funds and needs to shelter them
in the trust.
variation on the first-party trust is a pooled
disability or (d)(4)(C) trust.
Like the first-party or (d)(4)(A) trust, this
trust is to be funded with the beneficiary’s own funds,
which fall under a special safe-harbor in the law that
permits their creation and management by non-profit
associations for any number of beneficiaries.
Unlike the (d)(4)(A) trust, a disabled
beneficiary herself can fund such a trust
without the participation of a parent,
grandparent, guardian or court.
This can be very useful when there is no
appropriate trustee to manage funds for a disabled
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