Special Needs Planning and Trusts
How does a special needs trust differ from a revocable or irrevocable trust?
A special needs trust is a very unique trust for which an individual must qualify. There are several clauses that must be included that would never be found in any standard trust. One major difference is that the beneficiary cannot be either the grantor or the trustee. In addition, there are only a few people who can actually qualify as the grantor of a special needs trust. Another difference is that a special needs trust must specifically reference the federal or state statute under which it was created to be a valid, exempt trust. It must also provide for the payback of medical assistance benefits provided upon the death of the disabled to the state.
More than 41 million Americans, or almost 15% of the population age 5 and older have some type of disability, according to 2007 Census survey data. Some 6.2% of children ages 5 to 15, or 2.8 million kids, have disabilities, the Census Bureau found. And individuals with disabilities are living longer than ever before. That means that many disabled children will outlive the parents who support them, and all parents of a child with a disability need to plan accordingly.
It is often recommended that families create a “special needs” or “supplemental needs” trust as the centerpiece of their plan. Such trusts will provide funds to pay for certain expenses that enhance a disabled person’s quality of life — from residential treatment programs to movie tickets or haircuts — while not cutting off access to government benefits, such as Medicaid or Supplemental Security Income (SSI), which is administered by the Social Security Administration.
Who should have a special needs trust?
Any qualified disabled individual under the age of 65 should have a special needs trust if it’s at all possible. Special needs trusts are used for a disabled individual’s supplemental needs – meaning the needs that are not paid for by the state medical assistance programs or any other public benefits.
Where to Go for Help:
The Law Offices of Jennifer D. Peshke, P.A. can meet with you for an initial consultation to determine if Special Needs Planning should be a part of your family’s estate plan, and planning for your family’s future.
Government payments can cover much of a disabled person’s expenses. But in order to qualify for them, individuals cannot have assets in their own names that exceed $2,000 (not including a home, a vehicle and basic personal items). In 1993, Congress permitted special-needs individuals under age 65 to have trusts funded with their own money — such as assets from a legal settlement or an inheritance — and still have access to government benefits. More common, however, are so-called third-party trusts, in which parents provide funding for trusts that benefit their children.
Funds transferred to a trust are not considered to be assets of the special-needs individual, as long as there’s an independent trustee who controls distributions of the money and the disabled person can’t just grab cash from the trust at will. A trust also insures that a qualified individual will be watching over the money, a particular concern for families since many disabled individuals cannot manage money on their own.
Rules governing special-needs trusts are complicated and vary by state and by the source of the funds. Relatives or parents themselves can be the trustees of the funds, although some experts recommend naming a financial-services company or a trusted adviser, such as a lawyer or accountant, to help manage the money and make distributions.
Ideally, the trustee should communicate regularly with the disabled person and be able to work closely with doctors, therapists and a maze of government agencies. Trustees also need to be very careful when making distributions. For instance, they should avoid paying money directly to the person with special needs, since that may disqualify him or her from government benefits.
Coordinating Estate Plans
It’s also crucial for grandparents and other relatives to retool their own estate plans to leave gifts or inheritances to the special-needs trust, rather than to the person with disabilities directly, in order to preserve eligibility for government programs. Beneficiary designations on retirement accounts and life-insurance policies should also go to the trust.
Contact Us Today
Special needs trusts can be one of the most important tools in a family’s estate plan; yet, they’re not for everyone. If you have a loved one with a Special Need or documented disability, you should consult with an attorney who can explain your options to you. To explain what Special Needs Planning consists of, and what Special Needs Trusts are, who might need them, and how they differ from traditional trusts, contact The Law Offices of Jennifer D. Peshke, P.A. today for your consultation.
If you have a disabled loved one and believe a special needs trust might be right for your situation, contact Law Offices of Jennifer D. Peshke, P.A. to evaluate your options. Consultations are without obligation and are strictly confidential.