If you have a child with special needs, you might be concerned about his well-being after you are not there anymore to take care of him. You might wonder if there be enough money to support your child or if someone understands “the special needs”?
Create a Special Needs Trust
Appropriate estate planning strategy is needed for a family with a special needs individual. An experienced lawyer can assist family by creating a Special Needs Trust to take care of financial future and well-being of the child.
A Special Need Trust permits an individual that is 65 years or younger to receive certain resources beyond what is supplied by Medicaid without making him or her ineligible to receive the government benefits. The trust can be created while you are living or, you can create a will or a revocable living trust that establishes a Special Needs Trust at your death and transfers funds into the trust when you die.
Either way, a Special Needs Trust can provide a disabled dependent with the ability to pay for the care and services that are not covered by government benefits. This includes things such as therapies, special equipment, education, travel costs associated with medical appointments, and other similar costs that are not covered by Medicaid.
Financial Incentives for a Special Needs Trust
When the government determines whether or not your loved one qualifies for benefits, the assets held in a Special Needs Trust are not considered because the funds held in the trust are not readily available to the beneficiary. The distributions from a Special Needs Trust are made on a discretionary basis.
A Special Needs Trust could also be used to ensure your loved one continues to be cared for the way you want, after you are gone. For example, we’ve built provisions into Special Needs Trusts that provide for cash payments to a guardian who takes the family member with special needs out of the house to movies and meals, for example, in the same way the parents did while they were living.
Finally, it is also important to consider how to ensure that the trust has sufficient funds throughout the life of the individual with special needs. One method that is commonly used is to name the Special Needs Trust as the beneficiary of the parent’s (or other relatives) life insurance policies. You will also want to ensure that the trust assets are wisely invested so the funds continue to accumulate and grow. Family members and friends should also be encouraged to make donations or gifts to the trust and/or to include it as a beneficiary in their will or life insurance policy.
Frequently Asked Questions about Setting Up a Special Needs Trust
Who Can Be a Trustee of a Special Needs Trust?
Being a trustee of a Special Needs Trust is a difficult job to take on. As a trustee, one has responsibilities of managing trust assets. In addition, the trustee of Special Needs Trusts has to be familiar with government benefit eligibility and manage a trust to preserve those benefits. The trustee also has to deal with the fact that a beneficiary often lacks functioning mental skills. There can be disputes between family members, financial abuse and police involvement in some cases. In addition, trustees of Special Needs Trusts often face increasing scrutiny and oversight from government agencies demanding accountings on a regular basis .
Family members or close friends often lack experience and time necessary to deal with these demands of the role. Even though friends and family might understand the needs of the beneficiary with special needs, financial responsibilities of trustee cannot be equated with personal responsibilities of guardianship.
However, when there is a good understanding of the purpose of the trust and trustee responsibilities, family members can be a great trustee who will take inordinate amount of time to tend the needs of the beneficiary. They often do so out of love and consideration without charging as much as a professional would do.
An alternative to an individual trustee and a corporate trustee is a co-trusteeship where the corporate trustee assumes responsibilities of investment management and tax return preparation while the individual trustee concentrates on the needs of the beneficiary.
If a special needs trust has a modest amount of asset or cannot come up with a good candidate for a trustee, a non-for-profit organization can serve as a trustee for the pool of special needs trusts from many families. “Pooled trusts” are available in many states of the country.
What Should Be Included in a Special Needs Trust?
In addition to typical trust languages specifying trustee’s powers and distributions, a special needs trust must have a “Purpose Clause” that includes the language that the trust is intended to provide “special, supplemental and extra care” beyond that which the government provides. The clause should also state that the trust is not intended for a basic support, maintenance and health to ensure that the special needs trust is not required to pay for the services that would otherwise be provided by public programs.
The special needs trust also needs to consider including a provision to permit the trustee to amend the trust to conform to changes in the law or circumstances of the beneficiary. A trust protector or a advisory committee is often named to facilitate reformation of the trust or replacement of a trustee without going throug a court. .
How to Set Up A Special Needs Trust for Adults
There are several reasons why an adult needs to set up a Special Needs trust.
First, an individual may lack the mental capacity to manage his own financial affairs. In such a case, the individual’s assets can be managed by an appointed trustee of a Special Needs Trust who will ensure the assets of the trust is protected and available for the care of the individual at all times.
Second, a Special Needs trust can be set up to preserve public benefits while keeping assets. If an adult holds more than $2,000 in assets, he will not qualify for benefits such as SSI (Supplemental Security Income), Medicare or Medicaid. Since a beneficiary does not have control over assets in a Special Needs Trust, those assets are not considered as a part of total assets.
One example is where an individual receives a personal injury settlement and is on public benefits. He can set up a first party Special Needs trust which is funded by the individual under benefits himself. The first party trusts has an age limit where the trust should be funded completely by 65 years old.
How Much Does it Cost to Set Up a Special Needs Trust?
If a Special Needs Trust is set up as a stand-alone, the cost ranges from $2000. A Special Needs Trust can be added to an existing trust for a smaller fee.
It can be overwhelming to plan for a loved one with special needs, but it is imperative that you get started as soon as possible. Let us help. Call our office today to schedule a time for us to talk through a Family Wealth Planning Session, where we can identify the best strategies for you and your family.
This blog post is written for educational and general information purposes only and does not constitute a specific legal advice. You understand that there is no attorney client relationship between you and the blog publisher. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.