Planning for heirs with special needs requires careful consideration to ensure their financial security without jeopardizing their eligibility for essential government benefits. Recent federal developments in special needs trusts (SNTs) have brought significant changes, impacting how families can plan for their loved ones with disabilities. At Leeson & Leeson, our Bethlehem Estate Planning Lawyers work with our clients to provide them with an overview of federal law and their implication on estate planning.
Understanding Special Needs Trusts
A Special Needs Trust (SNT) is a legal arrangement that allows assets to be held for the benefit of a person with disabilities without affecting their eligibility for government benefits like Supplemental Security Income (SSI) and Medicaid. There are two primary types of SNTs, first-party SNT’s are funded with assets belonging to the person with disabilities. Third-party SNTs, on the other hand, are funded with assets from third parties, typically family members.
Recent Federal Developments
Several key federal changes have recently impacted SNTs. First, the Achieving a Better Life Experience (ABLE) Act allows individuals with disabilities to save money in tax-advantaged accounts without losing eligibility for SSI and Medicaid. Recent expansions have increased contribution limits and allowed rollovers from 529 college savings plans to ABLE accounts. These changes provide more flexibility in funding and managing SNTs in conjunction with ABLE accounts.
Second, the SECURE Act 2.0 made significant changes to retirement account rules, which can affect SNTs. Notably, the Act extends the age for required minimum distributions (RMDs) and allows for certain beneficiaries to stretch distributions over their lifetime, including those with disabilities. This change can help in coordinating retirement assets with SNT planning to maximize financial benefits for heirs with special needs.
Impact on Planning
These federal changes have several implications for estate planning for heirs with special needs. The ability to roll over funds from 529 plans to ABLE accounts provides families with more options to fund SNTs and ensure their loved ones have sufficient resources.
The SECURE Act 2.0’s changes to RMD rules allow for better integration of retirement accounts with SNTs, ensuring that funds are available for the beneficiary’s lifetime needs.
Updated SSA POMS guidance helps trustees and families better understand how to manage SNTs to comply with SSI rules, avoiding potential pitfalls that could jeopardize benefits.
Best Practices for Protecting Heirs with Special Needs
To effectively protect heirs with special needs in light of these developments, consider the following best practices:
- Coordinate with Financial Advisors: Collaborate with financial advisors to integrate SNTs with other financial planning strategies, including ABLE accounts and retirement accounts, to optimize funding and asset management.
- Stay Informed: Keep up-to-date with federal and state law changes affecting SNTs to ensure that your estate plan remains compliant and effective.
Seek Legal Assistance Today
Recent federal changes have enhanced the tools available for planning for heirs with special needs, offering more flexibility and protection for their financial future. At Leeson & Leeson, our Bethlehem estate planning attorneys are committed to helping families navigate these changes and develop comprehensive estate plans that secure the well-being of their loved ones with disabilities. If you have any questions or need assistance with special needs planning, please contact us for expert legal support.