In any family, the death or catastrophic injury of a primary caregiver can cause financial hardships for children. This is especially true for families with a child with special needs. These families are tasked with creating an estate plan to ensure that their child is cared for in the future. It is particularly concerning for a parent when your child has reduced mental capacity, or they are physically unable to manage their affairs.

In North Carolina, too much monthly income could mean that the child would no longer be eligible for government benefits, so it is critical to consider that when structuring an estate plan. Furthermore, the estate plan needs to ensure that the child has a pool of funds available to them if they can no longer access public funding.

Available Planning Options

Management of a deceased family member’s financial affairs can be a contentious issue. Without a properly drafted estate plan, you subject your family and particularly your child with special needs to the nightmare of family feuds over property and monetary assets. You risk having your child’s needs go unprovided. In addition, you expose your wealth to irresponsible guardianship that could see loss and abuse. This necessitates adequate estate planning through one of these available planning options.

Inter-Vivos Planning

This planning option is created during the lifetime of the trustor. Also known as the living trust, you create a plan on how any trust assets or incomes are to be managed. To cater to your child with special needs, you might make a disbursement regularly into the trust. As the ultimate default beneficiary, the child is then able to have their needs catered for without the government flagging this disbursement as a viable asset.

Testamentary Planning

A testamentary trust takes effect upon your death. It is considered a testament of will in which settlement of inheritance is done based on your wishes while still alive.

After establishing a plan you want to go with, remember to account for changes. This is significant since government programs change. Your planning option should be flexible enough to guarantee adjustments as needed.

North Carolina Intestacy Law

If you fail to make a will, the state takes on the division of your assets to your surviving relatives. The distribution is done depending on your family’s makeup. Notably, this distribution exposes your child to denial of government benefits, especially when the amount goes beyond the guideline instituted by the state.

Creating A Special Needs Trust

A special needs trust is the most critical part of your child’s long-term financial needs. You can choose to put aside some amount into this trust that will be disbursed upon your death. You can have your estate lawyer draft a disbursement that would not disqualify your child from government grants and help packages. Besides, the trust does not leave the estate to your child directly. This means that the Social Security Administration does not take the trust as a resource, and as such, your child would still be eligible for Medicaid.

Your estate lawyer can ensure that North Carolina laws do not flag any monetary benefits to your child with special needs. They can have it such that any benefits from your life insurance policy go to this trust instead of the child directly. The beneficiary can then have regular disbursements for their needs without making them ineligible for federal grants, for instance, SSI.

Types of Special Needs Trusts

The law in North Carolina makes provisions for three different types of special needs trusts. These include:

First-Party Trusts

This is for assets that will be released to the child following your death. It is a great option when the investments in question are significant, and you would want your child to have complete control of them.

Third-Party Trusts

This is the type of trust that creates the loophole for preserving eligibility for your child with special needs. Specifically, it takes care of any income from the parent’s investments or policies without attracting attention to the amount disbursed. 

Pooled Trusts

A nonprofit organization is tasked with administering this type of trust which caters to multiple beneficiaries, including the child with special needs.

Additional Tips for Protecting Your Child With Special Needs

Get Organized

Planning ahead can be daunting. To ensure that the process does not overwhelm you, specify strategies for collecting all information that will be needed. This information should be safely stored as it will come in handy when dividing your estate. Consider creating a record of any trusts you put into effect to ensure that the child is protected from any instances of fraud.

Name A Guardian

Families with children with limited mental capabilities worry about how the child will manage their finances. An excellent option for handling this commitment would be to name a guardian who would take on financial responsibilities for your child upon your death. If your child is underage, you might want to discuss a way to extend said guardianship beyond 18 years of age.

Name A Trustee

An independent professional trustee is a good option if you are looking for a responsible party to manage the trust after your death. Consider your family lawyer or individuals specialized in the appropriate care of your child with special needs. These individuals should supervise how the money from the trust is spent.

Apply for Power of Attorney

Consider a less restrictive proxy even as you plan for your child with special needs during estate planning. This ensures that a supervisor with goodwill and the proper knowledge can supervise your child as it pertains to the management of assets and funds left under their care.

As a parent with a child with special needs, you always have to consider how scenarios will play out in the event of your death. As such, it is vital to have documentation in place to protect your child, primarily since the intestacy laws in North Carolina do not specifically defend the interests of children with special needs. A good estate plan will utilize general and supplement trusts to maximize the benefits of whatever method you go with. Most important, it should be centered on ensuring that your child is safe and secure even in your absence.

Contact Our Cary Estate Planning Lawyers

Especially when planning to care for a child with special needs, it’s important to have the right estate planning team on your side. McCollum Law has the experience to help you structure your estate to make sure your family is cared for in the long term. Contact us today to schedule a consultation to talk about your situation!