Special Needs Trusts

During this Autism Acceptance Week, let’s take a little time to talk about special needs trusts. A useful planning tool for anyone with a disabled family member or living with a disability, a special needs trust can preserve assets and provide care for a disabled person and a disabled person’s family.

Not all estates are the same because not all families are the same. A family with a disabled family member has different needs than a family without a disabled family member.

Disabilities can cause financial hardship. Often, that hardship can lead to a diminished level of care as time goes on. It can also exhaust funds that would otherwise be available to family members and future heirs.

A special needs trust seeks to ensure that a person living with a disability will be properly cared for during childhood and well beyond. It can also aims to preserve assets for the care of family members.

What is a special needs trust?

A special needs trust is a specific type of trust that is designed to provide for the care and support of a person with a disability, while also preserving that person’s eligibility for needs-based benefits like Medicaid and Supplemental Security Income (SSI).  (To learn more about living trusts, in general, read “What is a Trust?)If designed and managed properly, a  special needs trust can ensure that a disabled beneficiary’s needs are provided for beyond that afforded by governmental aid. If handled properly, eligibility for such aid will be maintained.

With a special needs trust, a disabled child’s inheritance (or other assets) can be held in trust and managed by a trustee responsible for disbursing funds as needed to cover certain kinds of expenses not otherwise covered by governmental aid. 

To be eligible for SSI and other federal and state benefits, certain resource and income limits must be met. Without a special needs trust, inherited assets can disqualify a beneficiary from receiving government assistance. When this happens, it can spell disaster for the individual who relies on those lost benefits.

A special needs trust can provide a special needs beneficiary with resources, by allowing discretionary distributions to supplement the government benefits.

Choosing A Trustee for a Special Needs Trust

Choosing a trustee is a very important decision for all trusts. For an SNT, that decision carries even more weight. The trustee of a special needs trust has a vital role in managing the trust assets and making decisions about how they are distributed. More importantly, the trustee needs to make sure they maintain eligibility for governmental aid.

Some key factors to consider when selecting a trustee for a special needs trust:

• Is the candidate responsible with finances?
• Is the candidate able to understand and abide by the eligibility requirements?
• Is the candidate disciplined and detail-oriented?
• Is the candidate a U.S. citizen?
• Is the candidate knowledgeable about the beneficiary’s unique needs?
• Is the candidate available to serve as a trustee?

Obviously, the trustee should be someone who has the beneficiary’s best interests at heart. This could be a family member or friend. However, it can also be a professional trustee, such as a bank or trust company.

Other Considerations

To ensure that a beneficiary’s needs-based assistance is not lost due to ineligibility, it is important to provide clear instructions for the trustee. The method, manner, and purpose of distributions from the special needs trust can affect the beneficiary’s eligibility for needs-based assistance.  One wrong move can cause a beneficiary’s governmental assistance to be lost. In some cases, a mistake can also provide the government with a right to recapture previously paid out benefits.

A special needs trust should be regularly reviewed and updated as the child’s needs change over time. Overall, estate planning for children with special needs requires careful consideration and planning. Because of the risks, it is advisable to work with an estate planning attorney; preferably someone experienced with special needs planning. 

As we mark Autism Acceptance Week, let’s remember the importance of supporting and advocating for individuals with special needs. It is important so that we can ensure that their futures are bright and secure.

For more information:  If you would like more information about special needs trusts or estate planning in general, please feel free to call Koza Law Group at (760) 487-8330.