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Estate complexities in providing for children with disabilities

The primary purpose of most estate planning efforts is to provide support to loved ones after an individual has passed away. When a family includes a child with disabilities, it becomes even more important to ensure that there are adequate financial protections in place to support that child for the duration of his or her life. This can lead to estate complexities, and Tennessee families in this situation should consult with an estate planning professional to chart the best possible course of action.

One solution lies in the creation of a special or supplemental needs trust. This is a financial vehicle that will hold assets for the purpose of providing financial support for various care needs if and when such support is needed. These trusts are funded in much the same way as any other form of trust; assets are titled to the trust and become the property of the trust itself. A special or supplemental needs trust can be structured to be revocable, giving the family a degree of flexibility in their planning.

Many families choose to purchase life insurance to assist with funding this type of trust. The proceeds of the policy are payable to the trust and will then be protected from various loss risks. For example, life insurance proceeds that are held in trust cannot be seized by the beneficiary's future creditors or lost in a divorce or legal judgment.

Another type of trust that can assist families of a disabled child is known as a self-settled special needs or supplemental needs trust. These trusts have very strict guidelines and rules, but when properly structured, they can protect assets while also allowing the child to qualify for various types of public support, such as Social Security or Medicaid. A self-settled special or supplemental needs trust is a complicated option, and it should be considered with the guidance of a legal or financial professional trained in this area.

Parents of a disabled child want the best for their son or daughter. By taking advantage of various estate planning options, it is possible to work around estate complexities to reach a solution that will provide lasting and meaningful support, even after both parents are gone. Ensuring a secure future for one's children is the primary goal of many Tennessee parents, and these are just some of the available options to help reach that goal.

Source: The National Law Review, "Special Needs Children -- How Divorce Can Impact Your Estate Plan", Catherine F. Schott Murray, June 9, 2016

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