When we speak with families about estate planning, parents of children with special needs have different concerns and priorities for their children. It’s not only about passing on family assets; it’s about making sure their child will be cared for, supported, and protected after their parents have passed. Without a proper plan in place, an inheritance intended to help a child with special needs can unintentionally cause more harm than good, especially if it affects eligibility for essential government benefits like Supplemental Security Income (SSI) and Medicaid.
As attorneys serving families throughout Troy, Shelby Township, and across Oakland and Macomb Counties, we’ve seen how thoughtful planning can give parents peace of mind and create a stable future for their child. Estate planning for special needs is not just important—it’s necessary. Michigan law offers several legal tools that help parents secure their child’s financial future while protecting access to public assistance. The key is understanding how to use those tools properly and avoiding common mistakes that could have long-term consequences.
The Importance Of A Special Needs Trust
An effective estate planning strategy for families in this situation is creating a special needs trust, also referred to as a supplemental needs trust. A properly drafted special needs trust allows you to leave assets for your child without disqualifying them from government programs that have strict income and asset limits.
Michigan recognizes both first-party and third-party special needs trusts under the Estates and Protected Individuals Code (EPIC) and applicable federal law. A third-party special needs trust, created by parents or other family members using their own assets, is governed in part by MCL 700.7502. A special needs trust permits the trustee to use the funds for the child’s benefit. This transfer can be completed without directly distributing cash or assets to the child, which would otherwise be counted toward SSI and Medicaid limits.
Naming A Trustee And Planning For Care
Selecting the right trustee is a critical decision. The trustee is responsible for managing the trust, making distributions, keeping records, and complying with state and federal laws. Parents may choose a trusted relative, a professional trustee, or a combination of both to make certain consistent and informed management. The trustee needs to understand the rules surrounding SSI, Medicaid, and other programs to avoid mistakes that could affect eligibility.
It is helpful to include a letter of intent. A letter of intent is a non-legal document that outlines your child’s preferences, routines, medical history, and other important information. While letters of intent are not legally binding, they serve as a guide for future caregivers and trustees.
Guardianship And Alternatives
If your special needs child will not be able to make legal or financial decisions as an adult, you may need to consider guardianship. Michigan law, under MCL 700.5301 et seq., provides for the appointment of a legal guardian for an individual who is incapacitated. As parents, you can petition the probate court for guardianship after your child turns 18.
However, not every child requires full guardianship. Depending on your child’s abilities, alternatives such as supported decision-making or a power of attorney may be more appropriate. We help families evaluate these options to determine the least restrictive and most effective approach.
Avoiding Disqualification From Government Benefits
One of the biggest risks in estate planning for a child with special needs is leaving money to the child outright. If a child receiving SSI or Medicaid inherits assets directly—even just a few thousand dollars—they may lose those benefits until the money is spent down. That’s why it’s so important to use a trust to hold the inheritance.
Special needs trusts are not counted as assets for SSI or Medicaid purposes as long as the funds are not used for basic support like food or housing. Instead, the trust can pay for education, therapy, travel, recreation, and other quality-of-life expenses.
Coordinating With Your Overall Estate Plan
We also make sure that your other estate planning documents support your goals for your child. This includes updating your will, powers of attorney, and beneficiary designations. We often recommend a “pour-over” will that transfers any leftover assets into the special needs trust upon your passing. Beneficiary designations on life insurance policies and retirement accounts should also be coordinated to avoid naming the child directly.
Estate planning for a child with special needs is not a one-size-fits-all process. Every family’s needs are different, and we take the time to create a plan that works for your child, your finances, and your long-term goals.
Michigan Special Needs Trust Frequently Asked Questions
Can I Leave Money Directly To My Special Needs Child?
Leaving money directly to a child who receives needs-based benefits can cause them to lose eligibility for those programs. Even a modest inheritance can disqualify them until the money is spent. That’s why we strongly recommend using a special needs trust to hold the funds.
Who Should Be The Trustee Of A Special Needs Trust?
The trustee should be someone who understands the responsibilities involved, including the legal and financial rules that apply to special needs trusts. You can choose a trusted family member, a professional trustee, or a combination of both to manage the trust effectively.
What Expenses Can A Special Needs Trust Pay For?
A special needs trust can pay for items and services not covered by government programs. This includes therapy, medical equipment, transportation, education, vacations, and personal care items. The funds cannot be used for housing or food without affecting SSI benefits.
Do I Need A Will If I Create A Special Needs Trust?
Yes. A will is still essential for naming guardians and directing where your assets should go. We often create a pour-over will that directs your assets into the special needs trust if they were not placed there during your lifetime.
Can A Special Needs Trust Own A Home Or Vehicle?
Yes, but careful planning is required. A trust can purchase a home or a vehicle for the child’s benefit, but how it is titled and used must follow specific rules. We guide families through these decisions to ensure benefits are preserved.
What Happens To The Trust After My Child Passes Away?
With a third-party special needs trust, any remaining assets can go to other family members or charities of your choice. You control what happens to the funds after your child’s death. This differs from first-party trusts, which may require repayment to the state.
Secure Your Child’s Future With Boroja, Bernier & Associates
We understand the unique challenges parents face when planning for a child with special needs. At Boroja, Bernier & Associates, we create legally sound, customized plans that protect your child’s benefits and provide for their long-term care. Our offices in Troy and Shelby Township serve families throughout Oakland County and Macomb County. Contact our Shelby Township special needs trust attorneys by calling 586-991-7611 to schedule your consultation. Let’s create a plan that gives you peace of mind and safeguards your child’s future.
