It is extremely important for the parents of a child with special needs to embark on estate planning early on in the child’s life. First, in order to permit the child to collect government benefits, assets should not be held in the child’s name. Perhaps more importantly, the parents should establish a special needs trust, to enable them to leave monies to their child upon their death without jeopardizing those benefits. The monies in the trust will also be available to the trustee in order to enhance the quality of the child’s life. While many parents expect that their other family members will look after the special needs child, financially and otherwise, there can be adverse tax and other consequences if they provide financial assistance without the benefit of such a trust.
IRS Circular 230 disclosure: We inform you that any tax advice contained in this communication is not intended or written to be used, and may not be used by your or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code.