What Will Happen to My Special Needs Child if I Pass Away Without an Estate Plan?
May 31st, 2022 in Charitable Planning, Estate Planning, and Special Needs Planning
Charitable Planning
Passing away without a will, also known as dying “intestate,” can impact your surviving family in ways you hadn’t anticipated. Getting to decide where your money goes once you die isn’t a pleasant topic but one which is critical and needs to be embarked on at some point, and whether or not it will be Charitable Planning.
If you have a disabled child with special needs, interstate asset distribution becomes hugely problematic. Your child could end up not receiving public benefits entitled to them due to their disability. That’s why you need to start planning early with the help of a North Carolina estate planning legal team to ensure your child is protected from financial hardship later on.
What Does North Carolina Intestacy Law Say?
More than half of Americans die without a will. A common misconception is that assets will automatically be passed to the surviving spouse or that the person’s prior verbal statements to their loved ones regarding their assets will be followed upon death. Unfortunately, the state’s intestacy laws will take effect. In this case, it is North Carolina that will decide what goes where.
The distribution will depend on the family makeup:
- Your spouse will receive all assets and property if you have no living parents or children. If you have one child, the first $30,000 of personal property is given to your spouse, and the remainder is split into two and each half given to your spouse and child. If you have two or more kids, your spouse receives the first $30,000 and a third of the remaining assets. The remaining 2/3 is divided among the kids.
- Children will receive an even distribution if you have no living spouse.
- Parents will receive everything if you have no spouse or child.
- Distant relatives will receive assets if you have no living parents, spouse, or children.
- The state of North Carolina will receive your assets if none of your living blood relatives can be found.
What If I Have a Special Needs Child?
For parents with special needs children, they need to have special estate planning. If you leave your property to your child through North Carolina’s intestacy statutes, there’s a high chance the inheritance your child receives will put to risk his/her ability to receive government benefits.
Federal benefits such as Medicaid and Supplemental Security Income (SSI) are designed to aid the disabled have strict income and asset guidelines. So if your special needs child goes beyond these guidelines even by a dollar, they could be rendered ineligible and lose any monetary or medical help.
Will A Simple Will Help Acquire a Proper Estate Plan?
Trying to make a simple will is always a good first step toward acquiring a proper estate plan. A Raleigh estate planning attorney can help you do that. However, the presence of a disabled child makes a simple will unsuitable for your specific case. It might actually add to the cost of acquiring a proper estate plan.
Is There a Trust That Will Specifically Protect My Special Needs Child?
Many people assume that any trust can protect the interests of their special needs child. Besides, many people are familiar with testamentary trusts. However, this type of trust won’t protect your child’s eligibility for Medicaid and SSI. If you want to protect your child’s eligibility for government benefits, only a special needs trust can do that for you.
What Is a Special Needs Trust?
This type of trust is specially designed for a mentally ill/disabled child when the parent or caregiver dies. Notably, two different types of special needs trusts exist, namely self-settled trust and third-party trust. You can use a Raleigh special needs trust lawyer to help you understand the difference between the two and decide which one best fits your situation.
How It Works
A special needs trust doesn’t leave assets directly to your special needs child. The disabled beneficiary can’t access or control the trust property. Because of this, the Social Security Administration doesn’t consider such a trust to be a ‘resource’ if the beneficiary has no direct access to the property.
You can use a special needs trust to qualify for Medicaid. If your child has serious medical problems, Medicaid could pay for those medical expenses, which could otherwise have exhausted the estate rather quickly. However, to maintain Medicaid eligibility, the trustee must distribute an amount below the maximum income allowed by Medicaid.
A special needs trust can pay for medical care, entertainment, college fees, home improvements, transportation, some insurances, and vacations. However, you should clearly state that the purpose of the trust is to supplement state and federal entitled benefits.
Who Handles the Trust
A trustee will be appointed to distribute the property according to your terms and ensure your child is well cared for even in your absence. Since the trustee will have full control over the trust, you should be diligent in who you name as trustee.
Legal Advice from a Compassionate Estate Planning Lawyer
If a caregiver or parent with a disabled child passes away without a proper estate plan, chances are the child will face some serious financial problems. The intestacy laws in North Carolina don’t automatically protect the interests of special needs children or make such decisions for individuals.
One of the greatest gifts you can leave your child with is setting up a plan to take care of your child’s needs even in your absence. And there’s no better way to do this than to create a special needs trust. Talk to a special needs trust attorney in Raleigh to determine if this type of trust is a likely option for you and your family. Schedule a free consultation with us by calling (919) 568-3681.
