Remember how satisfying it was setting up a trust for your child with special needs? You named a trustee and a successor trustee, signed the paperwork, and paid the legal bills, and then you rested easy at night knowing you had put a plan in place for your child. Done!
Well, not exactly. Because things always change, whether over time or suddenly.
It's easy to throw your new special needs trust into a drawer and forget about it, especially if you are not planning on funding it until you pass away. Likewise, if your loved one with special needs has executed a durable power of attorney and health care proxy in case of an emergency, she too may squirrel the documents away for use if needed, and feel they never need to be looked at again.
But while having a plan in place is a great start, it does need to be maintained. You wouldn’t buy a new car and then decide never to change the oil, after all. When it comes to special needs planning, even small changes in circumstance can have major legal repercussions, and delay can be devastating.
Here are just a few examples of the types of changes that can have an impact on your special needs trust.
Trustees and successor trustees: Perhaps because of a major life event such as divorce, physical incapacity, or job loss, they are no longer capable of serving as your trustee. Is the successor you named back in the beginning still up to the job?
Health care agent: Is that person still able to jump in at a moment’s notice in the event of an emergency, or has he moved to another state or country? Does he still have the capacity and willingness to perform this very important role?
Finances: Think of big changes in your financial picture, such as an inheritance, the liquidation of a family business, the purchase of a life insurance policy, retirement, bankruptcy, or litigation. You may consider transferring additional funds to the trust, adjusting the language to add an extra layer of protection, or rethinking how the fund’s assets are managed.
Major life events: Any significant changes in your own life will have an impact on your dependent with special needs. These include losing a spouse to death or divorce, remarriage, the birth of another child, retirement, or relocating to another state where the laws governing special needs trusts are different.
Changes in the beneficiary’s situation: Your special needs dependent could develop more capacity through therapies and medical innovation, or she might need more support and assistance as time goes by. Or perhaps she has received an inheritance or a settlement from a lawsuit. Or your wishes for your child may have changed with time. Any of these developments will have an impact on how the trust functions in the beneficiary’s life. Does the language in the trust even allow provisions to be added or changed to meet any new requirements?
Then there is the ever-changing world of federal disability benefits, which can be challenging to keep track of. This is where your special needs planner fits in; he or she not only monitors shifts in disability benefits law, but may also be instrumental in shaping new policies on a local, state or federal level. Such new policies may have a direct impact on your special needs plan.
The good news is that special needs trusts are living documents that can be updated and changed on a regular basis. But whatever happens, DON’T:
• Put off reviewing the trust’s provisions. As we all know only too well, everything can change when you least expect it, whether as a result of global pandemics, extreme weather events, financial crises, or other emergencies. Don’t wait for such an event before reviewing the plan; check it at least once a year to make sure everything is the way you want it.
• Think you can do it yourself by making handwritten changes in the margins. Changes must be properly noted and executed through your attorney. If done incorrectly, without a legal review, such amendments could complicate matters for your special needs beneficiary down the line and lead to expensive litigation.
• Assign successor trustees based on assumptions. Do not presume, for instance, that a trustee’s spouse will take over if the trustee passes away. Always plan for contingencies when making decisions.
If it has been a while since you took a peek at your special needs plan, take it out, dust it off, and schedule an appointment with your special needs planner. You may have a lot of work to do—or perhaps none at all—but staying on top of things will pay dividends in the end.
This information is not intended to be a substitute for specific individualized tax, legal or estate planning advice as individual situations will vary. Neither Royal Alliance Associates, Inc., nor its registered representatives or employees, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.
Securities and investment advisory services offered through Royal Alliance Associates, Inc. member FINRA/SIPC. Royal Alliance Associates, Inc. is separately owned and other entities and/or marketing names, products or services referenced here are independent of Royal Alliance Associates, Inc. Special needs consulting services are not offered through Royal Alliance Associates, Inc.
Content provided by the Academy of Special Needs Planners, Copyright 2021