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Estate Planning Involving Beneficiaries With Special Needs

Estate Planning Involving Beneficiaries With Special Needs

One of the most difficult considerations for parents who have a disabled child is how that child will be cared for once the parents pass. This consideration makes estate planning a particularly important process for those with a beneficiary who is disabled or has special needs.

The will of the parents needs to provide for the care and well-being of the beneficiary into the future, which requires thoroughness and foresight so that the parents have peace of mind.

In this regard, a disabled beneficiary’s physical needs, living arrangements, support services, social interactions and health plans all need to be taken into account.

More detail on estate planning when there is a beneficiary with special needs is provided below but if you have questions on this issue, please contact us at Delaney & Delaney today.

How should you approach estate planning when there is a beneficiary with special needs?

Creating a will that addresses the unique issues faced by a beneficiary with a disability can be a complicated process, particularly if there are other non-disabled siblings.

The beneficiary’s level of disability and their particular needs will often determine the terms of the will – there is no one-size-fits-all template in this area.

Provision for the living, health and wellbeing needs of the special needs beneficiary is the paramount concern.

Sometimes, parents will leave the majority of their estate to non-disabled children with the instruction that they take care of the needs of their disabled sibling.

There are disadvantages to this approach given the possibility the siblings may die before their disabled brother or sister, leaving the special needs beneficiary without assets. In other cases, siblings may not act in the best interests of the sibling with special needs, perhaps thinking they are adequately cared for through government services.

It is also not wise, however, for property and other assets to be left to a beneficiary with special needs through the will, as in many cases they will not have the capacity to manage them.

The place of testamentary trusts

Another option is for the parents to create a will that divides assets between children into appropriate shares having regards to their comparative needs and provides that the disabled beneficiary’s share will be held within a testamentary trust (sometimes also called a protective trust). This form is also appropriate if the special needs beneficiary is an only child.

Some parents may want to gift their disabled child property, such as the family home, through the trust so that they have peace of mind the beneficiary will have somewhere to live for the duration of their lifetime.

The benefit of a trust is that its terms can be made very specific in relation to assets from the parents’ estate being used for the needs of the beneficiary with special needs.

It relieves the disabled beneficiary from having to manage their share of the estate, which is instead in the hands of trustees. The decision about the choice of trustee/s is very important. It is wise to appoint more than one trustee.  It can be appropriate to appoint the beneficiary’s siblings or other relatives or close family friends.  If there is no one within the family circle who is appropriate to act as Trustee, the parents may need to consider appointing a trusted legal representative, a private trustee company or The Public Trustee.  Each of the non-family options involves considerable additional expense which will reduce the funds available to the disabled beneficiary.

A trust for a disabled beneficiary should be tailored to the needs of each family and their wishes.  Generally, a trust for a beneficiary with special needs involves a proportion of the estate held in trust during the life of the beneficiary, with the Will stating who will receive any unexpended funds on the disabled beneficiary’s death.

The trustee can be empowered to use the trust’s capital and/or income for approved purposes that provide an ongoing benefit to the beneficiary, including for the health, benefit, education, and advancement in life of the beneficiary.

If a seriously disabled beneficiary meets certain eligibility requirements, they may benefit from the inclusion of a Special Disability Trust in the Will.  A Special Disability Trust is a particular form of trust which has been approved by Centrelink.  It can be established during a person’s lifetime, or it can be established in a Will.  A Special Disability Trust allows Trustee/s to hold assets or funds on trust for the benefit of a disabled person and, up to certain monetary thresholds, those assets will not impact the disabled person’s entitlement to receive government pensions.  This can be a particularly useful option to ensure a disabled beneficiary does not lose their disability pension upon receiving a large inheritance from their parent’s estate.

Estate planning for disabled beneficiaries may give trustees wide discretion to provide for the beneficiary from the income and assets of the trust so that they can adjust to the unique but changing needs of the person over their lifetime.

The will might be accompanied by a ‘statement of wishes’ to guide the trustees on the parents’ desires for how their child will be provided and cared for after they are gone.

How specialist advice can help

Creating an estate plan that will provide for a beneficiary with special needs into the future can alleviate some of the stress and concern held by parents of disabled children.

Many law firms have little or no experience in creating legal structures relevant to people with disabilities and other special needs, unlike Delaney & Delaney.

These matters can be both complex and sensitive so if you have questions or concerns about estate planning to account for the needs of a beneficiary with special needs, contact Delaney & Delaney today for a first consultation.