In our previous post, we began discussing ways parents can plan for the care of their disabled children. We mentioned special needs trusts as a great way to provide support for such children without harming their ability to qualify for government benefits down the road.
Here we'll look at options for housing and long-term care.
In terms of housing, there are various approaches parents could take. Some families, for instance, go in with another family and purchase a home for two disabled adults. Oftentimes a trust is set up and funded to ensure the mortgage and taxes are paid and the house is kept up. Another possibility is to set up a qualified personal residence trust, or QPRT for short.
In these arrangements, homeowners may stay in a home for a number of years prior to transferring ownership to an heir. The transfer takes place at a discount on the current market value of the home. This allows families to give their home to a charity or another family member who will manage it for the disabled child's lifetime use.
Housing can also be placed in a special needs trust. As we mentioned last time, special needs trusts will not harm the disabled child's ability to qualify for government benefits later on. The key to special needs trusts is to determine the specific asset requirements and income thresholds which would prevent the child from qualifying.
In terms of long-term care for the disabled child, special-needs trusts come in handy here as well. One common strategy for parents whose disabled children are younger than 65 is to qualify for Medicaid by placing assets in a special-needs trust for the disabled child. The important thing to remember here is that Medicaid has a "look back" period of five years, meaning any gifts made during that time are counted when determining how much money the parent can dole out before Medicaid will begin supplementing.
So, in terms of inheritance, housing, and long-term care, special needs trusts can be a very useful tool when planning for the care of a disabled child.
Source: Wall Street Journal, "Taking Care of Disabled Heirs," Sep 3, 2011.