What You Should Know About Disability and Special Needs Future Planning
By: David W. Jacobsen, Managing Attorney, Jacobsen Law Firm
Having a child or loved one with a disability or special needs can bring a family incredible joys and unique challenges. Because of that, it’s important to plan for the future. You may have questions like:
- How can I ensure that my loved one will be well cared for after I am gone?
- How can I provide for their current and future needs?
Perhaps you know that your loved one with a disability or special needs will never be fully self-supporting. They may need to access government benefits for medical costs and other types of support. You may be concerned about the multitude of funding sources and the requirements that accompany them. How do you plan for someone who will be unable to live independently?
Future Planning and Implementation
When planning for your loved one with a disability, it is important to choose the best person or organization to manage the person’s affairs. Choose a trusted person, but also someone who has the necessary skills to appropriately manage your loved one’s affairs. Each person and each family have different needs. There are myriad online resources for information and forms. However, an experienced attorney can assist with understanding the person’s disabilities, identifying goals and helping navigate through the different planning options to select the best solutions for them.
Special needs planning makes all the difference. It provides a way of holding assets for the person, while preventing them from being disqualified for government assistance.
Here is a quick synopsis of some of the options available to you.
Special Needs Trusts and Supplemental Needs Trusts are trusts established to hold assets for the benefit of a disabled beneficiary to be able to fund certain “extras” not covered by government benefits. These trusts are authorized by federal and state law as long as the trusts are drafted, funded and properly administered. If done properly, the individual can receive some “extras” and will still be eligible for government programs that might otherwise demand the depletion of the asset. In Minnesota, there are important distinctions between these two types of trusts.
Special Needs Trust
A Special Needs Trust is established using money that belongs to the individual with special needs or their spouse (i.e., inheritance or personal injury settlement). In the event all the funds in the trust are not used, upon the death of the person with special needs, the money goes to the state.
Supplemental Needs Trust
A Supplemental Needs Trust is established using money that belongs to a third party for the benefit of the person with a disability. In the event all of the funds in the trust are not used, upon the death of the person with special needs, the money is not required to go to the state and can be directed to other beneficiaries or non-profits.
Other Planning Considerations
529 ABLE Accounts
An ABLE Account is a tax-free savings vehicle that offers persons with disabilities and their families a savings plan with tax-free growth, while maintaining eligibility for public assistance programs. The requirements are as follows:
- Tax-free gains provided funds are used for “qualified disability expenses”
- Beneficiary must be disabled prior to age 26
- State-established plan
- Funded by anyone
- Deposits irrevocable and limited to $14,000 per year
- Payback to state upon disabled beneficiary’s death
Supported Decision-Making and Directives
Health Care Directives
If a person with a disability is over the age of 18 with legal capacity, that person can make a health care directive and power of attorney to enable another person to make health care-related and financial decisions for them in the future if they are unable make their own decisions. These documents, properly executed with an appropriate decision maker, can avoid the time and expense of a guardianship or conservatorship proceeding through the court.
A health care directive is a document signed by the principal that may include health care-related instructions to the person’s agent(s) and/or designate a person(s) named the health care agent(s) to make health care-related decisions in the event the principal is unable to make these decisions. The document must be in writing, dated and signed before two (2) witnesses or before a notary public. Your agent cannot be a witness or the notary.
Power of Attorney
A Power of Attorney is a document signed by the principal that names a person to serve as their attorney-in-fact to make financial decisions. The attorney-in-fact must act in the best interest of the principal and use the principal’s funds in a reasonable prudent manner to provide for the principal’s needs. The power can be limited or broad, but typically is durable, meaning that the power remains in effect if the principal becomes legally incapacitated.
Guardianship and Conservatorship
Guardians are persons appointed by the court to make personal decisions for the well-being of individuals (“wards”) who are legally incapable of making responsible decisions about personal needs and caring for themselves. Legal incapacity may be due to:
- Developmental disability or special needs
- Mental illness
- Alzheimer’s or dementia
- Stroke or other serious illness
- Being a minor child
A guardian may make decisions on the ward’s behalf with regard to medical care, nutrition, housing and public benefit programs.
Conservators are appointed by the court to make financial decisions for legally incapacitated individuals (“protected persons”). A conservator performs a number of duties for the protected person, which may include paying bills, entering into contracts (such as a lease or rental agreement) and investing assets.
Many people need both a guardian and conservator. One person may serve in both capacities, or separate individuals might assume those roles.
As you consider these questions, consult with financial planners and attorneys who are familiar with these terms. Use the content above to craft questions to ask these professionals as you seek to find someone you are comfortable working with.
More Information and Support
For assistance in all areas affecting the care, services and quality of life of your loved ones with intellectual or developmental disabilities (IDD), you can receive a FREE consultation from Family Navigation Services.
About the Author
David W. Jacobsen is Managing Attorney at Jacobsen Law Firm located in southern Minnesota. His practice areas include estates and trusts, business law, real estate, civil litigation and criminal law. His office is located at 158 Water Street North, Suite 1 in Northfield, Minnesota. He can be reached at (507) 786-9090. Learn more about David »