Planning for "Special Needs"

I thought this week would be a great opportunity to explore the available options in special needs planning. While this area of estate planning can be complex, understanding key concepts provides a solid foundation for making informed decisions.

Special Needs Trusts

This is the first thought that often comes to mind when thinking about special needs planning. A Special Needs Trust (SNT) is a critical tool that allows individuals with disabilities to receive financial support from their family while maintaining eligibility for government benefits. This trust ensures that funds are managed appropriately and used to enhance the individual quality of life beyond what government programs provide.

While the trust funds cannot be used for “basic support” expenses such as food or housing (that would disqualify the beneficiary from governmental assistance), a few examples of “special needs” includes education, transportation, and medical expenses not otherwise covered by Medicaid.

ABLE Accounts

An ABLE Account is another relatively new tool available for saving money without affecting benefits. Established in 2014, the ABLE Act “aims to ease financial strains faced by individuals with disabilities by making tax-free saving accounts available to cover qualified disability expenses.” These tax-advantaged accounts cover some of the same expenditures as an SNT but can also cover housing and basic living expenses.

Guardianship and Decision-Making

For individuals unable to make decisions independently, a guardianship will likely become necessary. This is a court-appointed role that grants a guardian the authority to make personal, medical, and financial decisions on behalf of the individual. Guardianship in North Carolina can be of the person, of the estate (financial), or both (general). Authority granted to the guardian can be either full (giving complete decision-making power) or limited (allowing the individual to retain some rights while the guardian oversees specific aspects of their life). While guardianship provides necessary protections, it also removes certain legal rights, so it should be considered carefully.

Powers of Attorney

A less restrictive alternative to guardianship is the use of powers of attorney. The nature and extent of the individual’s disability may limit the use of powers of attorney but they are highly preferable to a court-appointed guardianship so long as a trustworthy family member or friend is willing to serve. In general, there are two types of powers of attorneys: (1) financial (“general”) powers of attorney and (2) health care powers of attorney.

Again, choosing the right approach depends on the individual’s abilities and needs.

Final Thought

Proper planning not only ensures long-term care and financial security, but a stable future for your loved one with special needs. And creating a well-structured estate plan can protect their access to essential public benefits like Social Security and Medicaid while enhancing their quality of life.