What Happens to My Child with Special Needs if I Pass Away?

The answer depends on whether the parent passed away with a legal plan in place. For parents of children with special needs or a disability, having a legal plan is essential. A legal plan is more than just paperwork, it's protection for your child, to ensure their health and financial needs can be met, even after you're gone.

For special needs parents, not having a legal plan can lead to two major problems.

1) The child will likely lose essential government benefits, and

2) The judge will select the child's tutor (legal guardian).

Problem #1 - The Child May Lose Government Benefits

A person with disabilities is entitled to certain government benefits to help cover their needs, due to their medical condition that limits their ability to work. A couple of the major benefits for people with disabilities are SSI (Supplemental Security Income) and Medicaid. SSI provides monthly financial assistance in the form of a cash payment to help cover basic living expenses. Medicaid, in most cases, offers free healthcare coverage.

Currently, the maximum SSI payment is $967 per month, or $11,604 per year. That may not seem like much, but over time it adds up. For example, over a 50-year span, from age 18 to age 68, SSI would provide $580,200 in cash payments. With Medicaid on top of that, the benefits are of immense value.

In Louisiana, SSI and Medicaid are linked. This means, if a person qualifies for SSI, then they automatically qualify for Medicaid as well. These two programs work hand-in-hand to support your child's long-term needs.

However, SSI and Medicaid have a strict asset limit of $2,000. To be eligible for these programs, a person with a disability cannot hold more than $2,000 (either in money or property) in their name. This means that even a small inheritance can easily push a child over this asset limit. If an SSI and Medicaid recipient exceeds the asset limit, they will have to "spend down" their inheritance to below the $2,000 limit to receive SSI and Medicaid again.

Louisiana's Forced Heirship Laws Complicate the Issue

In Louisiana, if a parent dies without a legal plan, the state's forced heirship laws require that a portion of the parent's estate be left to certain children, including those with a disability. Under Louisiana law, a forced heir is a direct descendant who is under the age of 24 or a person of any age who is permanently incapable of taking care of themselves due to a mental or physical infirmity at the time of the parent's death. The forced heir's portion of the estate varies depending on the number of heirs. Usually, a forced heir is entitled to receive 25% of the parent's estate by law. While these laws are intended to protect vulnerable children, it often backfires - causing the child to lose essential government benefits.

Receiving even a small part of the parent's estate, which includes things such as bank accounts, investment accounts, real estate, retirement accounts, life insurance proceeds, and other personal property, can easily cause the child to exceed the $2,000 asset limit. If that happens, the forced heir who has a disability will immediately lose SSI and Medicaid.

The Solution to Problem #1 - Set up a Special Needs Trust

When a child has a Special Needs Trust, they can receive an inheritance of any amount through the trust and maintain their eligibility for government benefits, like SSI and Medicaid, at the same time. The Special Needs Trust holds any money or property intended for the child, with assets titled in the trust's name rather than the child's. Because these funds are not considered the child's personal assets, they are excluded from the strict $2,000 asset limit. This arrangement allows the child to continue receiving essential government assistance while also benefiting from an inheritance - helping ensure their long-term financial security and quality of care.

Problem #2 - A Judge Chooses the Tutor (legal guardian)

The second problem isn't about money. It's about who will care for your child if something were to happen to you. This is a deeply personal issue for all parents, and especially for parents with special needs children.

In most states, the person who steps in to take care of a minor child when the parents pass away is called a legal guardian. In Louisiana, we use the term tutor. A tutor is someone who has the legal right of physical custody over the minor child, to make decisions for them, and to take care of them if their parents pass away.

Without a legal plan, parents are silent on this issue. In this case, only the district court judge has the power to select the child's tutor. The judge will look first to the family to appoint a qualified relative, based on their opinion of the child's best interest. If there is no qualified relative, the judge will look to any willing family friends. If there is no one qualified, the judge will name a government agency as the child's tutor.

While a judge will do their best in selecting the tutor, the judge will not know your child, your family dynamics, or what you would've wanted.

The Solution to Problem #2 - Name Your Child's Tutor in a Legal Document

The only way to ensure that the tutor of your minor child is someone you trust, someone who understands your child's needs, and shares your values, is to formally appoint a tutor in a legal document.

Merely asking a friend or a family member by word of mouth to care for your child, in case you pass away, will not be enough to name that person as the child's tutor. Likewise, naming a godparent through the church is not the same thing as naming a tutor. A godparent is a spiritual role, while a tutor is a legal role.

If a parent wants to grant another person the legal authority to care for their minor child, it must be done formally in a legal document.