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Special Needs Planning

Written by Thomas D. Begley, Jr., Esquire, CELA

Special Needs Planning for loved ones with disabilities is extremely important. As long as parents are alive, they will
care for their children with disabilities. The problem begins when the parents are gone. Many children with disabilities
will be unable to take care of themselves. How will they live as happily and productively as possible once the parents
are no longer living? Where will the children live, who will take care of them, what will they do for money? All of
these things need to be addressed.

The Tools
There are five important tools in planning for children with special needs. They are a Life Care Plan, Public
Benefits, a Supported Decision-Making Agreement, Estate Planning, and a Special Needs Trust.

1. Life Care Plan.

The Life Care Plan should be the first step in any planning for loved ones with disabilities. Where possible, a
professional Life Care Planner can be engaged to prepare a plan. The Life Care Planning process usually begins with
an interview with the parents and then, when appropriate, an interview with the disabled person.

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a. The Players. The Life Care Plan outlines who the important players are in the life of the individual with
disabilities. The players would include the person with disabilities, parents, guardians, trustees,
important contacts, involved family members, pets, and friends.

b. Medical Information. Information should be gathered concerning the individual with disabilities’
physicians, therapists and specialists, prognosis, medical coverage, preferred hospital and pharmacy, necessary
medications, treatments or special care, allergies, emergency instructions, and whether the individual needs
assistance with taking medicine (i.e., insulin, shots, or certain pills).

c. Public Benefits. Public benefits that the individual may be receiving, whether those benefits can be
maximized, and additional public benefits that may be able to be accessed.

d. Abilities and Disabilities. What are the abilities and disabilities of the individual with disabilities
including limitations, extraordinary powers, medical or adaptive equipment/supplies, interaction with others,
stress, and change?

e. Personal Characteristics. These would include genera, personality, preferences, likes and dislikes, interests,
male/female attendant, clothing, favorite places, and sizes.

f. Activities. These would include housework, recreation, daily routines, visitation, work experience, and school.

g. Personal Care. What type of personal care does the individual need? These would include assistance,
dressing, bathing, hair care, shaving, using the toilet, other personal hygiene, special reminders, and special
instructions.

h. Meals. These would include preparation of meals, food allergies, likes and dislikes, eating assistance, and
other.

i. Care and Supervision.

j. Housing.

k.Employment. This would include current employment status and assistance in obtaining employment.

l. Social Activities.

m. Transportation.

n. Religion.

o. Hopes and Expectations. These would include hopes, necessary action, additional information, additional
instructions.

p. Estate Planning. Is Estate Planning possible? How would it be accomplished?

q. Guardianship. Does the person with disabilities need a Guardianship?

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2. Public Benefits.
Is the beneficiary receiving or will the beneficiary be applying
for public benefits as follows: Supplemental Security Income
(SSI), Social Security Disability Income (SSDI), Railroad
Retirement Disability (RRD) Benefits, Medicaid, Medicaid
Waivers, Katie Beckett Waivers, Childhood Health Insurance
Program (CHIP), Medicare, Medicare Buy-In, Federally
Assisted Housing, SNAP (Food Stamps), Prescription Drug
Assistance, Low Income Heating and Energy Assistance
(LIHEAP), Temporary Assistance for Needy Families
(TANF), Division of Developmental Disabilities (DDD),
Group Home, Psychiatric Institutionalization, Veterans
Disability Benefits, and/or any other Public Benefits?

3. Support Decision-Making Agreement.

The Brittany Spears case focused the attention of the nation
on limitations of the Guardianship system in the United
States. While Guardianships serve a worthwhile purpose,
they are often unnecessarily restrictive. The goal of a
Guardianship is to embrace the least restrictive alternative
to allow individuals to maintain their rights, dignity, and
independence. Nevertheless, Guardianships do restrict the rights of people to direct their own lives in important
areas of decision-making. In some instances, individuals are stripped of their right to drive, vote, marry, etc. While
the loss of these rights can be limited by Court Order,
Guardianships are often a harsh remedy.

Many families are unaware that supported decision-making is an option for individuals with cognitive disabilities
and many courts are also unfamiliar with the concept and how it can be utilized. Some jurisdictions, Texas,
Delaware, District of Columbia, Alaska, Wisconsin, North Dakota, Nevada, and Rhode Island, have supported
decision-making statutes. New Jersey and Pennsylvania are among the states that do not have these statutes yet
but, even absent these statutes in these states, families, disability organizations and even courts are recognizing the
importance of these agreements.

Supported decision-making should be considered by an individual who has a cognitive disability or disabilities and
needs assistance in making major life decisions but appears to be able to do so with the support of a trusted advisor.
The trusted advisor could be a family member, a friend, a professional or advocate, or a community member. These
trusted advisors, called “Supporters,” assist with gathering information for medical, psychological, financial, or
educational decisions, explaining available choices and options so that the individual with disabilities, known as the
“Decider,” can make the best decisions, and then the Supporter helps communicate the Decider’s decisions to the
appropriate parties.

These arrangements can then be memorialized in an agreement. Lawyers representing clients in Guardianships should
first consider whether a Supported Decision-Making Agreement can be used in lieu of a Guardianship. Before
entering an Order for Guardianship, courts should consider whether a Supported Decision-Making Agreement is a
viable alternative. In determining whether or not to terminate a Guardianship, courts should also consider whether

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the ward would be able to function without a Guardianship if a Supported Decision-Making Agreement were in place.
Supported Decision-Making Agreements should be used in conjunction with medical Powers of Attorney,
financial Powers of Attorney and, where appropriate, a Will.

4. Estate Planning.
a. Estate Planning for Parents. Parents of special needs children should consider estate planning documents.
These would include Wills, Living Trusts, Living Wills, Powers of Attorney, a Third-Party Special Needs Trust,
and coordinating probate and non-probate assets such as life insurance, retirement accounts, annuities, payable
on death (POD) accounts, transfer on death (TOD) accounts, and joint tenancy and tenancy by the entirety assets.

b. Estate Planning for Child with Disabilities. Estate planning documents for a child with disabilities
should be considered when the child has sufficient mental capacity to understand these documents. The
documents would include a Will, a Living Will, a Power of Attorney, and a Supported Decision-Making Agreement.

5. Special Needs Trust.

A Special Needs Trust is a trust created for a person who has special needs as a way to supplement that person’s public
benefits. Those public benefits may include SSI, Medicaid, Section 8 Housing, SNAP, LIHEAP, TANF, Group Homes,
and other government-sponsored assistance programs.

a. Document. The Special Needs Trust is a document. The document is prepared by a lawyer who specializes
in Elder and Disability Law. It is drafted in conjunction with input from the parents of the child with
disabilities.

b. Grantor. The grantor of the Special Needs Trust is typically the parent or parents of the child with
disabilities who will eventually fund the trust on the death of the parent. The trust could be funded sooner, but
usually it is not funded until the parents die.

c. Beneficiary. The beneficiary of the trust is the child with disabilities. Monies in the trust are used
primarily for the benefit of the individual with disabilities.

d. Trustee. The trustee is the entity that manages the money, invests it for income and growth, and makes
distributions for the benefit of the beneficiary. It is always wise to designate a professional trustee. Public
benefit rules constantly change. If a family member is named as trustee they seldom keep up with the changes,
and this often leads to problems. The problems include a loss of public benefits for the individual with
disabilities. The family member serving as trustee also has a target on his or her back, because they can be sued
for failing to administer the trust properly.

e. What is Involved in Selecting a Trustee? Good candidates for a trustee include the following:
• Disability Organizations. Most states have non-profit disability organizations that can serve as trustee
of a Special Needs Trust. Most of these disability organizations administer Pooled Trusts for small trusts
(i.e., $25,000 to $200,000). This means that the funds are pooled for investment purposes, but each
beneficiary receives a monthly statement showing the account activity. This would show income earned by

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the account as well as any deposits made to the account and expenditures from the account together with
the account balance. For larger trusts it is usually more practical to establish a standalone Special Needs
Trust, but the disability organization can serve as trustee.

• Bank or Brokerage Firm. Many banks and brokerage firms are willing to serve as trustees of Special
Needs Trusts. Some are not. However, experience shows that only a handful of banks and brokerage firms
are really qualified and do a good job serving as trustees of Special Needs Trusts. Beneficiaries of Special
Needs Trusts need a lot of attention and a lot of compassion. Not all financial institutions provide the
attention that is needed. Care should be taken in selecting the proper trustee.

Families should be aware that a trustee’s annual fees typically range from 1% to 2% of the trust assets.
These annual fees are a very worthwhile investment toward the preservation of security and quality of life
for a child with disabilities.

f. What are the Advantages of Special Needs Trusts?

A Special Needs Trust can:

• Help maintain an individual’s public benefits.

• Help enrich the beneficiary’s life.

g. What Requirements Must be Met

When Establishing a Special Needs Trust?
There are three key requirements:

• The trustee must be given absolute control over

the distribution of the funds.

• The person with special needs cannot have the

authority to revoke, amend, or terminate the trust.

• The person with special needs cannot have the

power to compel a distribution from the trust.

h. Trust Protector. When dealing with a professional trustee, it is wise to include in the trust document
a trust protector. The trust protector has the right to remove and replace the trustee in the future. What makes
trustees good trustees is the people administering the trust. If those people retire or leave, the trustee’s level of
service may decline. Having a family member named as trust protector enables the trust to be changed from
one entity to another, if necessary.

i. Budget. At the time the trust is funded, a family member should meet with the trustee and establish a
budget for the individual with disabilities. The budget would include shelter, transportation, and personal
needs. A determination should also be made as to how long the trust should last. To oversimplify, there is a
rule of 4%. This means that if money is intended to last for 30 years, the trustee can only distribute
approximately 4% per year for the benefit of the beneficiary. For example, if $500,000 is placed into a trust
and the trust is intended to last 30 years, the trustee can only distribute $20,000 on behalf of the
beneficiary each year. This is a concept that many people do not understand but it is important if the trust is

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intended to last. There are more sophisticated ways to determine
distribution levels such as Monte Carlo simulations, but the 4% rule is
a good rule of thumb.

Features of a Special Needs Trust

1. Enriches Our Child’s Life.
By establishing the Special Needs Trust, the funds in the trust can
be used to enrich the child’s life while at the same time maintaining
important public benefits.

2. Assets Not Countable.

The assets in the Special Needs Trust are not countable, and
distributions from Special Needs Trusts are not considered income
so long as distributions are not made directly to the trust beneficiary.
Distributions are made to a third party who delivers goods and services to the individual with disabilities. For
example, the individual with disabilities or a family member may obtain a credit card. The trustee and the individual
with disabilities or family member agree on a budget. Items in the budget are charged on the credit card, and the
credit card bill and receipts are sent to the trustee for payment on a monthly basis. Cash is not given to the trust
beneficiary, because cash distributions to the beneficiary would reduce or eliminate public benefits.

3. What Can the Special Needs Trust Pay For?

The type of Special Needs Trust being discussed is called a “Third-Party Special Needs Trust,” because it is being
funded by assets of someone other than the trust beneficiary. The trust is usually funded by parents but is often
funded in whole or in part by grandparents, other family members, and even friends. If the beneficiary is receiving SSI,
the SSI is intended for food and shelter. Therefore, any distribution from the trust for food or shelter will reduce the
beneficiary’s SSI payment. The maximum deduction is one-third of the payment plus $20. Sometimes this reduction
is unavoidable, but where possible the beneficiary should use the SSI payment for food and shelter and let the trust pay
for other needs. The trust cannot make gifts but can pay for almost anything else.

4. Life Insurance.
Life insurance is often a good vehicle to fund a Special Needs Trust. Unfortunately, many parents of special needs
children have term insurance because it is cheaper. The problem with this is that the parents almost always outlive the
term, and the insurance disappears. It is better to have whole life insurance even if the amount is significantly less,
because the need is never going to go away. A married couple can obtain something called “second to die” life
insurance. This is cheaper and usually solves a good part of the funding problem.

5. Taxes.
Income, estate, and gift taxes must all be considered in designing and drafting a Special Needs Trust.

a. Funding on Death. In most cases the Special Needs Trust is not funded until the death of the grantor.
Therefore, income tax and gift tax would not be a consideration, but federal and state estate and inheritance
taxes must be considered.

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b. Lifetime Funding.
• Income Tax. In order to shift income tax from the grantor to the beneficiary, trusts are sometimes funded
with significant assets. Those trusts cannot be Grantor Trusts. They are Complex Trusts and any income
distributed to the beneficiary is taxed to the beneficiary. Any income retained by the trust is taxed to the
trust at the usually higher trust rates. These trusts must be irrevocable.

• Gift Tax. If an irrevocable Special Needs Trust is funded during the Grantor’s lifetime and the trust is
not a Grantor Trust, then gift taxes must be considered.

• Estate Tax. Estate and inheritance taxes must be considered in connection with Special Needs Trusts.
If the trust is large enough, the grantor may elect to fund it during lifetime while the federal estate tax is
high, since the IRS has indicated that there will be no clawback if and when the federal estate tax
exemption is reduced (i.e., January 2026).

6. ABLE Account.
The Special Needs Trust document can authorize the establishment and funding of an ABLE account. Money can be
set aside in an ABLE account for a child with disabilities. The ABLE account can be administered by the child, an
agent under a Power of Attorney, or a guardian for the child. Sixteen thousand dollars per year can be deposited into
the account, and so long as the total does not exceed $100,000 it does not affect SSI. However, the maximum earned
income contribution to an ABLE account by a disabled beneficiary is now $12,880. The account requires a payback to
Medicaid on death, so it makes little sense to put too much in the account but having some money in the account under
the control of the individual with disabilities or a family member does make sense from a control standpoint. Earnings
are also tax-free, but this is a minor consideration since earnings on a small account would be minimal.

The Team
Special Needs Planning involves the assembly of a Team. The Special Needs Trust Attorney can assist the client in
assembling the Team. Team members include the following:

1. Life Care Planner.

The role of the Life Care Planner is to develop the plan discussed in Special Needs Planning Part 1.

2. Special Needs Trust Attorney.

The Special Needs Trust Attorney can assist the client as follows:

• Directing the client to receive the maximum public benefits for the special needs child.

• Preparing a Supported Decision-Making Agreement between the individual with disabilities and the
decision-maker.

• Providing assistance for the special needs individual and the family of the special needs individual in
preparing appropriate Estate Planning documents.

• Drafting a Special Needs Trust and assisting with identifying an appropriate Trustee.

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3. Trustee.
The Trustee of a Special Needs Trust will invest the funds under management and make appropriate distributions.

4. Financial Advisor.
Occasionally, the Trustee will delegate financial management to a Financial Advisor with the consent of the client.

5. Nurse Consultant.
The Nurse Consultant will elicit the person with disabilities on an “as needed” basis and arrange whatever care is required.

6. Social Worker/Care Manager.

A Social Worker or Care Manager will visit the special needs individual and be sure that all non-medical needs are
being taken care of. The Social Worker or Care Manager might assist the beneficiary with:

• Monitor the individual’s progress.

• Ensure that the individual’s needs are met.

• Coordinate nutrition and cleanliness programs.

• Make sure that exercise and physical therapy programs are

maintained.

• Coordinate any socialization or psychological counseling.

• Ensure that the special needs person has assistive devices, if

needed.

• Have a plan and a responsible advocate available to resolve

problems in a quick and timely manner, in the event of an
emergency.

7. Social Security Disability Appeals.

The individual specializing in Social Security Disability Appeals may be brought on board, if necessary.

8. Special Education Attorney.

A Special Education Attorney may be brought on board on an “as needed” basis.

Ten Common Mistakes in Special Needs Planning

1. Leaving Assets Directly to Your Special Needs Child.
Many parents have a Will leaving assets outright to their children including their special needs children. This mistake
renders the child ineligible for means-tested public benefits including SSI and Medicaid. Best practice dictates that the
parents leave the assets to the child in a Special Needs Trust to maintain the public benefits of the special needs child.

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2. Dividing Assets Equally Among All Children.

The natural instinct of parents is to divide their assets equally among their children on death. Parents love their
children equally and want to treat them fairly. The problem is that if there is a special needs child who is unable to
work and support themselves, the child will have greater needs. Best practice dictates determining what the special
needs child may need and carving that out first, then dividing any remaining assets among the healthy children who are
able to support themselves. This often requires the purchase of whole life insurance.

3. Failure to Start with a Life Care Plan.

A Life Care Plan can be designed by a professional or by a family member with the assistance of professionals. The
Life Care Plan should begin by identifying the future needs of the family member with disabilities and establishing a
standard of living that the parent wants for that child. The cost of the standard of living should then be established.
This would include a discussion of immediate cash needs such as a home, a vehicle, repayment of debt, clothing and
shoes, a computer, a cell phone, etc. A monthly budget should then be established, which would include shelter,
transportation, and personal needs. How will all of these needs be met financially? The child may be receiving some
benefits, and some can be paid for by accessing the trust. Assuming the trust can pay 3.3% per year for annual
maintenance of the child with disabilities, how much will be required to fund the trust? Does the parent have sufficient
assets? If not, will whole life insurance be required?

4. Failure to Access Public Benefits.

Many parents who have children with disabilities apply for SSI for their child with disabilities prior to the child
attaining age 18 and are rejected. The parents do not realize that after age 18 the income and assets of the parents are
no longer deemed to the child with disabilities and another application should be made to qualify the child for SSI.
In New Jersey, an individual receiving SSI automatically receives Medicaid.

5. Failure to Maximize Public Benefits.

Parents often fail to maximize public benefits available to a disabled child. Parents commonly provide food and shelter
for their child with disabilities and the child receives a one-third reduction in his or her SSI payment. By executing a
Lease with the child with disabilities and receiving payment from the child’s SSI payment for food and shelter, the SSI
payment can be maximized. The one-third reduction in the SSI payment for 2022 amounts to $280 per month.
Parents often overlook other public benefits that may be available including those set forth previously in the paragraph
titled Public Benefits. These should be explored and eligibility for these public benefits should be considered.

6. Failure to Obtain Guardianship.

Many parents fail to obtain guardianship for their child upon the child attaining age 18 when that child is
incapacitated and unable to make decisions. Without a guardianship, the parent really has no legal authority to make
medical or financial decisions on behalf of the child. Parents could be appointed Guardian of the Person or Guardian
of the Property.

7. Obtaining Guardianship When Guardianship is Not Necessary.

In many instances once a child is 18 and has limited ability to make decisions, the child may be able to make decisions
with the support of a person such as a parent, family member, friend, or organization. The alternative to an unnecessary
guardianship would be a Supported Decision-Making Agreement.

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8. Failure to Obtain a Living Will and Power

of Attorney for a Child with Disabilities.
Often a guardianship can be avoided, assuming the child has
capacity, by having a child with disabilities execute a Medical
Power of Attorney and Financial Power of Attorney appointing
parents or other family members as Health Care Representative
for purposes of making medical decisions or as Agent under
a Power of Attorney for the purpose of making financial
decisions.

9. Waiting.
Many clients wait too long to plan. The longer a client waits
to plan, the less likely it will be that sufficient assets will be set
aside to provide the necessary standard of living for the child
with special needs.

10. Relying on Other Family Members to

Take Care of the Special Needs Child.
Other family members, particularly siblings, are often ready,
willing, and able to assist with providing care for a family
member with disabilities. However, when the time comes
to provide that assistance, problems often arise. Frequently,
there is an understanding that the child with special needs will live with a sibling. Sometime this works; often it
does not. Occasionally, the spouse of the sibling strenuously objects, and sometimes the sibling themselves realizes
that this undertaking would be enormous. Often, a sibling is willing to offer limited assistance, such as working with
a disability organization or trustee, to ensure that the Life Care Plan developed for the child with special needs is
properly implemented. In most cases, this is a realistic target.

Ten Steps in Planning for My Special Needs Child

1. Retain a Competent Special Needs Trust Attorney.
The first step in planning for a special needs child is to retain a Special Needs Trust Attorney who is experienced in
assisting families with special needs children. Many Estate and Trust Attorneys draft Special Needs Trusts, but do
not have sufficient volume or sufficient experience to do a deep dive into the needs of the family of the child with
special needs.

2. Develop a Plan
As long as parents are living, they will be sure that their child with special needs is taken care of. The problem is after
the parents are gone. Who will take care of the child or children? Where will they live? How will their needs be paid
for? Do they work or could they work?

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3. Identify a Funding Source to Pay for the Standard of Living That You Want the
Child to Attain.
Often, this means leaving your special needs child a larger share of your estate than your healthy children. In some
instances, it may mean leaving all of your estate for your special needs child. Frequently, life insurance, especially
second-to-die life insurance, is a good solution. A financial advisor with experience in dealing with families with
special needs children can be invaluable.

4. Siblings.
If your special needs child has siblings, what role, if any, will they play in the life of your special needs child? What can
they do to help? Realistically, will your special needs child be able to live with a sibling? If not, can the sibling work
with a professional trustee to ensure that the special needs child achieves the standard of living that you desire.

5. Housing.
What will your special needs child do for housing? Is it realistic to think they can live with a sibling? If not, can they
live in a group home? If a group home makes sense, at what point should that be considered? There is a very long
waiting list for group homes in New Jersey and most other states. When should an application be made for a group
home? Often, this should be done before the parents become too old to care for the child at home.

6. What Happens When My Child Turns 18?

When a special needs child turns 18, frequently he or she is eligible for SSI. If the child is incapacitated,
guardianship should be considered. If the child has marginal capacity, perhaps a Supported Decision-Making
Agreement will suffice, and a guardianship can be avoided.

7. Public Benefits.
What public benefits are available to special needs children? Frequently, these benefits include SSI, SSDI, Medicaid,
Medicare, Group Homes, Federally Assisted Housing, Food Stamps (SNAP), Low Income Home Energy Assistance
Program (LIHEAP), Division of Developmental Disability (DDD) services and many others.

8. Community Resources.
Community resources, including disability organizations and government agencies, are available to assist the family
of a child with disabilities.

9. Estate Planning.
Parents of children with disabilities should implement an estate plan as early as possible. The estate plan would include
a Will, a Living Trust (if appropriate), a Living Will, a Power of Attorney, and a Special Needs Trust. Estate planning
for a child with disabilities who has capacity should also be considered. A simple Will, a Living Will, and a Power of
Attorney are all useful. The Living Will and Power of Attorney can often be utilized to avoid guardianship.

10. Family Discussion.

Once steps 1 through 9 have been completed, bring your circle of people who will provide assistance together to
discuss the role that each is expected to play.

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