April is World Autism Acceptance Month, and also happens to be tax month. There is no better time to take a look at how you can utilize estate planning to maximize the inheritance for your beneficiaries while minimizing tax liability. There are many estate planning tools available to provide necessary assistance for special-needs family members, who may or may not be able to work or live alone. This article will examine different tax-saving estate planning tools to consider with your attorney.
Special-Needs Family Members
Every family member contributes beautiful memories and unconditional love to everyone. One of the greatest fears for parents of special-needs children is the possibility of no longer being able to provide a safe and secure home. Many families utilize services such as occupational therapy to manage expectations and try to prepare their special-needs child for life without assistance, but every person has individual needs regardless of the circumstances of their birth.
During your lifetime, you may be able to provide the best doctors and education available to your special-needs child, but if you are unexpectedly unable to care for them, or need to prepare for elder care for yourself, many aspects of your child’s life will no longer be within your control. This is when comprehensive estate planning for both you and your special-needs child is most important, but it must be set in place well in advance to provide the appropriate benefits for everyone.
“Special-Needs” Trust
A special-needs, or “supplemental needs” trust (SNT) is an estate planning tool that allows you to provide financial support to a loved one with a disability or special-need without disqualifying them from government benefits. For example, simply leaving all of your assets to your child will subject them to probate, estate tax, and potentially leave them open to fraud or exploitation. This inheritance will likely disqualify them from important government benefits such as Medicaid or Social Security benefits.
Creating and funding an SNT can name a trusted individual or an entity such as a non-profit as the trustee, who will oversee and manage the trust’s assets. While establishing an SNT, you can outline exactly what the funds can be used for, while simultaneously allowing the funds you have set aside to stretch further with the additional supplemental income. The funds and assets outlined within the SNT are not technically owned by the beneficiary, which means that they will not be taxed even after the trust is activated.
Funding an SNT
For those who may be seeking ways to fund both their own retirement and the remaining years of their special-needs child, an Individual Retirement Account (IRA) can be created for this purpose. For example, certain IRA’s can be established with the SNT as the beneficiary. Certain IRA’s can also “stretch” the length of distribution to last the remainder of the beneficiary’s lifetime, or even establish tax-free growth and withdrawals.
To determine if these options are suitable for your family, the best option is to work with an experienced estate planning firm. The team at HighPoint Law offices understands that each client has unique circumstances and should be informed of the best possible estate planning tools to save them and their families money and time. To schedule your consultation, contact us online, or call 215-997-9773 today.
