If you are the parent of a child with special needs, you already understand the importance of planning for your child’s future. You likely also understand the importance of planning for the possibility that you will not be around in that future. Like all parents, you want to ensure that your child is financially secure and emotionally protected if something happens to you. Incorporating a special needs planning component, complete with a Special Needs Trust, into your estate plan is one way to accomplish these goals. The attorneys at Wilcox Attorneys, PA discuss the benefits of adding a Memorandum of Intent to your Special Needs Trust.
The Importance of Special Needs Planning
When your children are minors, special care must be taken within your estate plan to provide for them if something happens to you because they cannot inherit directly from your estate. Once they are adults, however, they can be incorporated into an estate plan just as any other beneficiary would be. If your child has special needs, however, estate planning remains complicated even after your child reaches adulthood.
Both while you are alive and in the event of your death you may wish to continue to provide financial support to your adult child with special needs. Your adult child, however, may also rely on government assistance programs such as Supplemental Security Income (SSI) and Medicaid and these programs have very strict income and asset limits that apply to eligibility. Providing direct financial assistance or gifting anything of value to your child could, therefore, cause him/her to lose eligibility for those assistance programs. Incorporating a special needs planning component into your estate plan prevents such an unintended outcome.
Within your special needs planning component, you may create a Special Needs Trust (SNT), also known as a Supplemental Needs Trust. An SNT is specially designed irrevocable living trust that can “supplement” the financial assistance provided by government assistance programs, such as SSI and Medicaid. For the assets held in a SNT to be exempt from consideration when determining eligibility for assistance programs, the trust must include precise language making it clear that it is an SNT. Assets held in an SNT may be used to purchase things for the beneficiary that increase his/her quality of life, but that are not considered necessities. For example, funds held in an SNT might be used to purchase a vehicle or to finance a vacation, but not to pay rent or purchase food. When you create your Special Needs Trust you will appoint a Trustee whose job is to administer the trust and protect the trust assets. Your Trustee will likely be responsible for making discretionary distributions from the trust, making it important that the Trustee understands your child and your wishes for your child. This is where a Memorandum of Intent can help.
Adding a Memorandum of Intent to a Special Needs Trust
All you need to establish an SNT is a trust agreement; however, adding a Memorandum of Intent (MOI) benefits both you and your child as well as helps the Trustee during the administration of the trust. Although an MOI is not a legally binding document, it can be extremely helpful to your Trustee when he/she is making decisions relating to distributions of trust assets. Think of an MOI as a roadmap for your Trustee to use when deciding whether a distribution is in the best interest of your child (the trust beneficiary). Because a Memorandum of Intent is a document that you create, it can contain any information you deem important. Some suggestions of information you might want to pass on in an MOI include:
- Your child’s likes and dislikes.
- Descriptions of the people in your child’s life and his/her relationships with them.
- Your child’s diagnosis, prognosis, and ongoing medical needs.
- Your child’s capabilities and limitations.
- Your parenting philosophies.
- Religious or spiritual beliefs that you want passed on to your child.
- A “day in the life” of your child.
Are You Ready to Create a Memorandum of Intent?
For additional information, please sign up for one of our FREE estate planning webinars. If you wish to discuss adding a Memorandum of Intent to your Special Needs Trust, contact the experienced Washington County, Fayetteville, Springdale, Rogers, Bentonville, and Northwest Arkansas special needs planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.
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