Women & Money: Dividing Assets Fairly For A Special Needs Child

If you do have a special needs child or a child who is not disabled or on governmental assistance but who has greater needs than the other children, the question of how to divide the assets can be very tricky. Some parents prefer to have all assets held in a special needs trust for the child who needs them, and then at that child’s death have the trust end and the money distributed among the other children.

Other parents do not feel that the special needs child (because of the government programs available) will actually need all that much money and do not feel right denying their other children an inheritance. If need be, they feel, the other children will take care of the special needs child. This approach, of course, comes with risks. It’s possible the other children may predecease the special needs child, spend the money on their own legitimate needs, become disabled or get divorced and need the funds.

For that reason sometimes a special needs trust will be funded with life insurance – and the special needs child will be omitted from the other terms of the estate plan. That way, if the trust is irrevocable (and funded only with life insurance) when the insurance is paid, it will come in free of gift, estate and income taxes. To the extent the special needs child needs it, it is there. To the extent it is not needed, it will eventually be distributed to the other children free of any tax consequence.

One of the most difficult issues for a special needs child is where the child will live if the parents die. Frequently that child cannot live by himself. Yet it is a tremendous burden to a sibling or family member to take in that child. For that reason I have seen an increas­ing trend of parents placing special needs children in group homes during their lifetimes so that a support structure has been put in place and the adjustment that comes with the death of parent (and best friend) does not also mean a change in home.

It is especially important when planning for the future of a special needs child that the assets are coordinated with the plan. All beneficiaries of life insurance policies, pension plans, IRAs, and annuities must be reviewed. If a special needs child is named directly (instead of the trust) or if there is no designation of beneficiary and the asset defaults through your estate, then your plan can quickly unravel and the receipt of those funds by the disabled child will jeopardize his government eligibility.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently announced the release of an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  Annino’s book is an exhortation, resource and trusted companion for women in all facets of life.  To purchase the book visit:  http://amzn.to/hOHuEV or for more about Annino, visit: www.patriciaannino.com

 

 

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