A parent of a child with Special Needs must take special care when preparing an estate plan. Special Needs Trusts are often recommended to ensure that an inheritance will assist a child with special needs without negatively affecting government benefits. Sometimes a parent will choose to forgo a Special Needs Trust in favor of an informal arrangement with surviving siblings. (ie. All the money will be left to the healthy child, Sharon, to care for the child with special needs, Sarah.) The risks of such an informal arrangement are numerous. Using the names from our example above:
• Sharon could get divorce, subjecting her inheritance to potential claims from her spouse.
• Sharon could die, leaving the funds subject to division based on her estate plan.
• Sharon could run into creditor issues, leaving the funds subject to creditor claims.
• Sharon could be irresponsible with money.
• Sharon could refuse to provide for her sister, Sarah.
The last risk listed is what happened in the California case of Kalfin v. Kalfin. In that case, Debra, who was blind and disabled and suffered from a number of serious medical conditions, often relied upon her Father’s financial assistance. A few months before Debra’s Father died, he changed his estate plan from one that divided his estate equally between his two daughters, Debra and Judith, to one where almost everything was left to Judith. In exchange for this change, Judith promised to take care of Debra. After the Father’s death, Judith refused to provide her sister, Debra, with any help. Debra sued her sister, Judith. Debra ended up winning on a claim of breach of contract and financial abuse of a dependent adult and was awarded damages. Debra accumulated over $800,000 in attorney’s fees in the process. Debra and Judith’s Father could have avoided the expensive and drawn-out litigation his daughters engaged in with proper estate planning. Further, proving a verbal contract in Trial is difficult and Debra is fortunate to have prevailed.
Just as a parent takes special care and expends special efforts when caring for a special needs child during life, that parent must take special care when creating an estate plan to ensure that his child is cared for after his death. Failure to plan appropriately could result in the child lacking the financial resources he needs.
For more information on Special Needs Trusts and Planning with a Child with Special Needs, contact a Medicaid planning attorney.