The Top 10 Common Mistakes in Special Needs Planning and How to Avoid Them
Planning for a loved one with special needs requires a comprehensive approach to ensure their financial security and quality of life. It's an essential yet often complex process that involves various legal, financial, and personal considerations. Failure to plan effectively can lead to unintended consequences that may affect a loved one's eligibility for benefits, inheritance, and overall well-being. Here are the top 10 common mistakes made in special needs planning and practical tips on how to avoid them.
1. Doing Nothing
One of the most significant mistakes is neglecting to establish any special needs plan. Without a plan, the estate is subject to state probate rules, which don't account for beneficiaries with special needs. This oversight could lead to the wrong person being chosen to manage the person’s care or a loss of essential benefits. Be proactive and create a comprehensive plan early on.
2. Disinheriting the Loved One
To protect government benefits like SSI and Medicaid, some families are advised to disinherit their special needs loved one. This approach is risky, as public benefits provide only minimal care. Instead, consider setting up a third-party special needs trust to safeguard the inheritance while preserving benefits.
3. Assuming Others Will Care for Your Loved One
Leaving assets to a sibling with the expectation they’ll care for your loved one can be problematic. Because of life changes like divorce or financial hardships, the intended support may not materialize. A properly drafted special needs trust can offer a reliable alternative by ensuring funds specifically for the loved one's care.
4. Using a One-Size-Fits-All Special Needs Trust
A generic trust may not address a loved one's specific needs. ACTEC stresses the importance of tailoring a special needs trust to adapt over time and align with changing laws.
5. Failing to Plan Beyond Public Benefits
While preserving benefits is crucial, planning should go further to enhance the loved one's quality of life. This can include outlining caregiving, housing, and developing a management team. Special needs planning aims for comprehensive support, not just legal documentation.
6. Waiting Until Child Turns 18
Special needs planning should start well before reaching adulthood. Early planning accounts for medical expenses and lifelong support, alleviating the urgency at age 18 when benefits eligibility becomes a focus.
7. Having Assets in Child's Name
Assets exceeding allowable limits can disqualify a child from benefits. Awareness and strategic planning ensure assets don't exceed these limits, sustaining eligibility for benefits like Medicaid.
8. Assuming a Special Needs Trust Is Enough
Simply having a trust isn't sufficient without proper funding. Financial strategies, including life insurance, can bolster a special needs trust to ensure long-term support.
9. Not Consulting Appropriate Professionals
Working with a proficient team of attorneys and financial advisors experienced in special needs planning is crucial. Companies like MetLife offer services specifically catered to these requirements.
10. Procrastination
Delay in planning can result in unpreparedness when unexpected events occur. Begin the planning process as soon as possible. Engage with resources like Ken R. Ashworth Associates for guidance in creating an effective plan.
Key Considerations: Special needs planning demands a multifaceted approach involving legal protections, financial strategies, and personal care plans. Engage with experienced professionals and remain proactive to avoid these common pitfalls.
Relevant Companies:
- MetLife
- The American College of Trust and Estate Counsel
- Ken R. Ashworth Associates
- Parks Zeigler, PLLC
- PK Law
By addressing these mistakes and employing practical strategies, families and attorneys can create robust plans that protect individuals with special needs and enhance their quality of life.