Creating a Special Needs Trust

Being the parent of a special needs child can be a wonderful and challenging task. Parenting a child with special needs or taking care of an adult with special needs requires countless hours of making sure that their doctors, therapists, teachers, and care providers are the best you can find and that they give you the best advice about their progress.  You must in turn, learn to trust yourself  to make the right decisions about their care and future needs.  Concerns about their future are very real.  Where will they live after you and your spouse are no longer alive?  Who will care for them, and where will the money come from?

Your greatest asset as a caregiver is information.  Open a dialogue with your spouse, siblings, children, or your parents about your plans and expectations of caring for your loved one. Communication and honesty are key here. You may also be concerned about your sanity, or you may just want more time to actually enjoy your family.  If you find yourself in this position, take comfort in the fact that you are not alone.

It must have also  crossed your mind that if something were to happen to you today, who would be there to protect the needs of your loved ones, especially those with special needs?  Of course you can leave money or property to your loved one, but as you are probably aware, doing so without some careful planning will almost certainly jeopardize their ability to receive benefits under the Supplemental Security Income (SSI) and Medicaid programs.  Unless you make legal arrangements, benefits simply won't be available until your loved one's inheritance is used up.

What is A "Special Needs Trust"?

The legal document that may be most helpful for families needing to make provisions for a child or loved one with special needs is called a Special Needs Trust (SNT).  A SNT holds in trust monies or property for the benefit of the physically or mentally disabled person ("beneficiary").  A SNT will normally provide for supplemental needs beyond those provided by the government as Supplemental Security Income, Medicaid, Section 8 Housing or other benefits.  A SNT can help ensure that those you seek to protect will have the resources necessary to live complete and fulfilling lives. It allows for funds placed in the trust by you to be used for the necessary care of your loved one.  If offers sufficient flexibility to handle almost any situation, while providing privacy in the details of the arrangements made by you, grandparents, or others who wish to make a gift to your loved one with special needs.  A SNT allows you to protect your loved one's government benefits while continuing to supplement their special needs.

A Special Needs Trusts Can Be a Powerful Tool by

  • Protecting the assets of a loved one with a disability, while retaining eligibility for needed government benefits for health care and financial assistance.
  • Protecting your loved one with special needs from predators who target young and vulnerable individuals.
  • Providing guidelines for how your loved one with special needs should be supported to enhance their quality of life.
  • Naming the appropriate person to manage money and advocate for your loved one.
  • Protecting your loved one from claims of divorced spouses or creditor claims.
  • Protecting your loved one from making poor financial decisions due to lack of capacity, immaturity, or good nature-such as giving money away to strangers.
  • Protecting Health Care for Individuals with Disabilities:

The most important reason to protect the inheritance of a person with a disability is to maintain their eligibility for health care coverage.  Health care costs and care-giving costs are the two most expensive needs for an individual with a disability.  You need to include this in your planning the inheritance you intend to leave them.

How Can a Special Needs Trust Help?

Remember, you as the primary caregiver can make sure that your loved one receives the full benefit of your inheritance without losing eligibility for Medicaid and SSI by developing a special needs trust.  A special needs trust can benefit those of any age who have a disability that qualifies them for SSI and Medicaid benefits.  It is also useful to those individuals with a disability who do not have the capacity or capability to manage their own assets.

How a Special Needs Trust Works:

The funding vehicle you select for your special needs trust can have a dramatic impact on the amount of resources available for your loved one.  Investments, retirement accounts, annuities or other financial resources can potentially multiply the value of your trust fund over the years.  Funding a special needs trust can be overwhelming, seeming to be an impossible task for many families.  In most instances, a parent or other family member can take out a Term, Survivorship or Permanent Life Insurance policy on themselves.  You fund a Special Needs Trust by naming the Special Needs Trust as the beneficary of the life insurance policies, retirement accounts, or annuities.  By doing this you create an irrevocable trust that provides a solution for the short term and long haul.  Your goal is to accumulate cash for the future, on a tax-deferred basis, and allow the trustee to access the cash through withdrawals and loans to help meet the expenses of your loved one over the years. Funding during your lifetime allows family members to reduce estate liability by gifting within IRS regulations ($13,500 each year as of 2014).

Also integral to the establishement of  the SNT is to change all beneficiary forms, directing proceeds of pensions, life insurance policies, annunities, IRA's and other assets that you wish to commit to the future care of your special needs family member to the trust rather than to them.

Part of the task of setting up a special needs trust will be to choose the trustee.  The SNT is an arrangement under which a person (called the "grantor") places property in the hands of a manager ("trustee").  The grantor of a special needs trusts names himself as trustee and another trusted person as the successor trustee (usually another family member).  The grantor serves as trustee until he dies, becomes incapacitated, or resigns, at which time the successor trustee takes over.  Each individual who serves as the trustee is legally obligated to follow the terms of the trust document and to use the property for the benefit of the disabled individual who is identified in the trust document (the "beneficiary").  The trust takes effect when it is signed and notarized and anyone can contribute property to the special needs trust.

The person you choose to succeed you as trustee will manage and spend, without supervision, the property you leave for your loved one.  You will need to pick one or more successor trustees to step in should you die or become incapacitated.  Even it you pick someone else as the initial trustee, you should name successor trustees so that there is someone in line to take over management for the trust if the initial trustee can no longer serve.

Replacing the love and care you give to your family member with special needs may be impossible, but providing for a future filled with support, and competent care is within your grasp.  Planning now for the time your family member must go on without you can be one of the greatest gifts of love you have to give.

Three Rules of Gift Giving:
  1. Do not give or accept financial gifts or assistance in the name of your special needs loved one.
  2. Deposit gifts into a special needs trust that benefits your loved one.
  3. Be aware that there is no difference between gifts of cash, bonds, stock, property, inheritance, annunities, art, and automobiles. They all can be included as part of your loved ones net wort
Statistically, women are more likely than men to take on the stressful day-to-day responsibilities of caring for a disabled love one. As a financial planner, I work with families and attorneys on developing the funding for special needs trusts, an as a special needs advocate, you can arrange for me to be at CSE, CPSE, 504, and  Impartial Hearings. As a senior care advocate, I will make sure your disabled loved one is taken care of when you are no longer able to do so.

Call me for more information and a referral to an attorney who specializes in Guardianship, Estate Planning, Special Needs Trusts, Durable Powers of Attorney, Wills, Health Care Proxys, Medicaid and Medicare Planning.

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