Parents in New Jersey and elsewhere will ideally create an estate plan that takes into account the needs of their children. Doing so may be more important if a child has special physical, mental or emotional needs. This is because a properly crafted plan may allow a child to receive assets without jeopardizing their ability to receive government benefits if necessary.
One mistake to avoid is naming a child as a beneficiary to money inside of a retirement account. Some people choose to do this because of the flexibility and convenience it provides. If a child currently qualifies for Medicaid, receiving that money directly may disqualify him or her going forward. To avoid such a situation, it may be best to create a special needs trust.
A special needs trust is ideal because assets can be left directly to it instead of a person who receives government assistance. Such a trust is generally valid as long as the trustee is not the beneficiary and if the trust is created by someone other than the beneficiary. Money or other assets left in the trust can be used to buy clothes, take vacations or for any other use that may benefit the child.
The use of trusts as part of an estate plan may make it easier for parents to provide for their children if they are incapacitated or pass away. This may be true whether the child is a minor or an adult with special needs. An attorney may be able to help an individual create special needs trusts or other planning documents as needed. It may also be possible for an attorney to review documents that already exist to ensure their validity or that they meet an individual’s needs.