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Addressing the educational and vocational needs of an individual with special needs involves a combination of a comprehensive letter of intent and a fully funded special needs trust. Consider the capabilities and desires of the individual: do they want to continue in school, and if so, is it public school or specific programs?
If they wish to go to college, the financing for it should be available in the trust. The letter of intent can express the parents' wish for their child to pursue an advanced degree. However, remember that this document only suggests this to the trustee and doesn't obligate them to pay for it. Therefore, choose a trustee who aligns with your desires and will follow through with them.
A successful special needs plan requires communication and regular review. Inform those you've appointed in fiduciary roles about the plan; they will be in charge when you're no longer able to be. An annual review is crucial as circumstances change: people age, marry, divorce, or pass away; substance abuse or creditor issues may arise; or people may develop special needs of their own.
Pick a date for your annual review to assess changes in your life over the past year and compare these to your plan provisions. Amendments may be needed based on these changes. Furthermore, consult an attorney on legal changes, such as new government programs or changes to needs-based levels.
Yes, tax considerations do exist in special needs planning. Trustees must pay income tax on undistributed money.
In a third-party special needs trust, the trustee pays taxes on behalf of the trust, which likely has its own Employer Identification Number (EIN), and files a tax return. For a first-party trust, the trustee pays taxes, but the beneficiary or the person with special needs files the tax return using their social security number.
While these are not necessarily complications, they are important factors to consider to keep the plan current if the trusts are funded.
Most special needs plans are designed to be fully amendable during one's lifetime. If during your annual review, you notice changes in the circumstances or improvements in the individual's capabilities, you can adjust the plan accordingly. For instance, if the individual with special needs gains the ability to work part-time, you can modify the plan to reflect this progress. Regular reviews ensure the plan stays relevant to the individual's evolving needs and circumstances.
Family members and caregivers play a vital role in the special needs planning process, as they interact with the individual with special needs on a daily basis. Their intimate knowledge of the individual's habits, preferences, and needs informs the development of the letter of intent.
This document contains crucial details about the individual's lifestyle and preferences, such as a nonverbal person's preference for Pepsi over Coke. Such knowledge, which may be overlooked by others, can help ensure a smoother transition if the individual with special needs ends up in a group home or with a relative who wasn't their primary caregiver.
Absolutely. Insurance, including life and disability insurance, can be incorporated into a special needs plan to ensure the financial sustainability of the plan. Many parents caring for children with special needs may not have sufficient assets to fund a special needs trust after they pass away due to their own medical bills. To address this, a life insurance policy or annuity can be structured to fund the trust and ensure the plan's execution.
However, it's important to consider potential issues such as recovery liens by the state on the assets of parents who end up on long-term benefits without proper planning. This could prevent the distribution from their estate to the special needs trust.
Also, government programs like Medicaid or Medicare may not cover all long-term care expenses, necessitating Medigap or private insurance. Therefore, while planning, consider the costs of these insurances and whether they can be afforded. Some individuals may rely on private insurance first, then Medicaid (or Access), and finally, Medicare, depending on their circumstances and what each program covers. For more information on Addressing The Needs Of A Special Needs Individual, an initial consultation is your next best step.