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SPECIAL NEEDS PLANNING

Planning for the future of a loved one with special needs requires careful consideration and specialized strategies to ensure their financial security and well-being. Special needs estate planning in Illinois involves creating a comprehensive plan that preserves your loved one's eligibility for government benefits while providing for their ongoing care and support. This guide covers the key elements of special needs estate planning to help you navigate this important process.

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1. Understanding Special Needs Trusts

​What is a Special Needs Trust?

  • A Special Needs Trust (SNT) is a legal arrangement that allows assets to be set aside for the benefit of a person with special needs without disqualifying them from receiving government benefits such as Supplemental Security Income (SSI) and Medicaid.

  • SNTs are designed to provide for additional expenses that enhance the quality of life for the beneficiary, such as medical care, education, transportation, and recreational activities.

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Types of Special Needs Trusts:

  • First-Party Special Needs Trust: Funded with assets that belong to the individual with special needs, such as an inheritance or personal injury settlement. These trusts must include a provision that allows Medicaid to be reimbursed for benefits provided after the beneficiary’s death.

  • Third-Party Special Needs Trust: Funded by assets from third parties, such as parents, grandparents, or other relatives. These trusts do not require Medicaid reimbursement and are often used as part of a broader estate plan.

  • Pooled Trust: Managed by a nonprofit organization, a pooled trust combines the resources of multiple beneficiaries into a single trust while maintaining separate accounts for each individual. This option can be more cost-effective for families with smaller amounts to set aside.

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2. Preserving Government Benefits

Importance of Eligibility:

  • Many individuals with special needs rely on government benefits like SSI and Medicaid, which are means-tested programs with strict income and asset limits. Improper planning or direct inheritance could disqualify your loved one from these essential benefits.

  • A well-drafted Special Needs Trust can hold assets without counting them toward the SSI and Medicaid eligibility limits, ensuring that your loved one continues to receive these critical supports.

​Using a Letter of Intent:

  • A Letter of Intent is a non-legal document that provides detailed information about your loved one’s needs, preferences, medical history, and daily routines. While it does not replace a legal document, it serves as a valuable guide for trustees and caregivers, helping them make decisions that align with your loved one’s best interests.

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3. Guardianship and Powers of Attorney

Guardianship:

  • If your loved one with special needs is unable to make decisions independently, establishing guardianship may be necessary. In Illinois, guardianship is a legal process where the court appoints a guardian to make personal, financial, and medical decisions on behalf of the individual.

  • There are different types of guardianship in Illinois, including full guardianship, limited guardianship, and temporary guardianship, depending on the level of support needed.

​Powers of Attorney:

  • For individuals with special needs who can make some decisions but need assistance, a Power of Attorney (POA) may be an appropriate alternative to guardianship. A POA allows your loved one to appoint a trusted individual to make specific decisions on their behalf.

  • In Illinois, you can establish a Power of Attorney for Property (financial decisions) and a Power of Attorney for Healthcare (medical decisions).

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4. Funding a Special Needs Trust

​Life Insurance:

  • Life insurance is a common way to fund a Special Needs Trust. By naming the trust as the beneficiary of your life insurance policy, you can ensure that funds will be available for your loved one’s care after your death.

Savings and Investments:

  • Savings accounts, investments, and other assets can also be directed into a Special Needs Trust. This approach allows you to set aside funds specifically for your loved one’s needs without jeopardizing their eligibility for government benefits.

529 ABLE Accounts:

  • In Illinois, you can establish a 529 Achieving a Better Life Experience (ABLE) account for a person with special needs. ABLE accounts allow individuals with disabilities to save money for disability-related expenses without affecting their eligibility for SSI and Medicaid.

  • While ABLE accounts offer tax advantages, they have annual and total contribution limits, so they may be best used in conjunction with a Special Needs Trust.

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5. Estate Planning Considerations

​Choosing a Trustee:

  • The trustee of a Special Needs Trust plays a critical role in managing the trust assets and ensuring that funds are used appropriately. It’s important to choose a trustee who understands the unique needs of your loved one and the complexities of managing a Special Needs Trust.

  • You can appoint a family member, friend, professional trustee, or a combination of trustees to oversee the trust. Some families also choose to establish a trust advisory committee to provide guidance to the trustee.

​Regularly Reviewing Your Plan:

  • Special needs estate planning is not a one-time event. As your loved one’s needs and circumstances change, it’s important to review and update your estate plan regularly. This ensures that the plan remains aligned with current laws, financial situations, and the evolving needs of your loved one.

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6. Legal Assistance and Resources

​Working with a Special Needs Planning Attorney:

  • Special needs estate planning requires specialized legal knowledge. An experienced attorney can help you navigate the complexities of setting up a Special Needs Trust, appointing guardianship, and ensuring that all aspects of your estate plan comply with Illinois law.

  • It’s essential to work with an attorney who understands both federal and state regulations regarding special needs and disability law.

​Additional Resources:

  • There are numerous organizations and resources available to help families with special needs estate planning in Illinois. These include the Arc of Illinois, Equip for Equality, and the Illinois Department of Human Services, among others.

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