Special Needs Tax Credit for Legal Fees?

Posted on December 29, 2009 by Mary W. Browning

There is a movement underway to encourage Congress to change the tax code to provide up to a $5,000 tax credit for legal fees paid with establishing legal guardianship.  The tax credit may also be available for legal fees paid in connection with establishing a trust for a person with disabilities.  The tax credit would be available for the person who actually paid the legal fees.

The Special Needs Tax Credit Alliance, a non-profit organization, has been formed in order to raise awareness for this issue and to build national support for the tax credit.  The Special Needs Tax Credit Alliance petition is located at http://specialneedstaxcredit.com.

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Ending Your Marriage Does Not Mean Ending Your Commitment to Your Special Needs Child

Posted on December 15, 2009 by Lori I. Wolf

The end of a marriage does not end your commitment to your child with special needs. First, it is important for any child support dedicated to a child with special needs to be allocated under the separation agreement to a special needs trust so that these assets do not affect the child’s ability to receive government assistance. It is important in connection with a divorce that each spouse consider the impact of the separation on his or her individual special needs planning. Each parent must have appropriate special needs planning in order to protect the child’s eligibility for assistance. Each spouse can have their own special needs trust with different trustees and different beneficiaries. Despite this, it is important that where possible, the parents of the child with special needs coordinate the funding of the trusts to ensure that adequate resources will be available to the child, and to ensure that the both spouses have incorporated the planning necessary to preserve the child’s eligibility for assistance.

If you incorporate special needs planning in your estate plan, but your ex-spouse has not, the planning you have done will not be enough to protect your child’s eligibility for assistance at the time that your ex-spouse dies.

In obtaining the divorce, one issue which is not often contemplated is who is responsible for becoming the guardian of the child upon the child’s attainment of age 18 (one parent or both together) and who has responsibility for educational decisions with respect to a child (this could be both parents or one). These issues should be addressed in a divorce agreement to minimize disputes following the divorce.
 

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Who Can Set Up a Special Needs Trust?

Posted on December 1, 2009 by Mary W. Browning

The answer depends on what type of Special Needs Trust – a Third Party Special Needs Trust or a First Party Trust.

A third party trust, that is created to hold assets of another person for the benefit of the person with special needs, can be set up by anyone who is over the age of 18 and has the mental capacity to create such a trust. Typically, a parent or grandparent sets up a third party trust because they are usually the ones who are leaving assets to the person with special needs. However, with older couples, sometimes one spouse sets one up for the surviving spouse. In addition, a friend or other non-relative may set up a third party special needs trust to be the recipient of gifts from other friends of the person with special needs.

A first party trust, which is a trust created to own the assets of the special needs person, can only be created by a parent, grandparent, guardian or court. First Party Trusts have many more requirements than third party trusts and it is important that all formalities, starting with the creator of such trust, are followed.
 

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