Planning for loved ones with special needs through Special Needs Trusts has become even more important in today’s society due to advances in medicine and the increased life expectancy for individuals with disabilities. Transferring property to a beneficiary who has a disability requires special planning and consideration. Without the proper planning in place, a disabled beneficiary may lose eligibility to receive government benefits.
Q: What is Special Needs Planning?
Special Needs Planning is not simply a Special Needs Trust. Special Needs Planning involves a comprehensive analysis of your overall estate plan and a thorough understanding of the disabled beneficiary’s circumstances. Proper Special Needs Planning takes into account information about the day-to-day needs, medical care and activities of the individual.
We’ve seen numerous occasions where an attorney puts together a so-called Special Needs Trust without complying with the complex rules and regulations applicable to government benefits. In addition, those attorneys do not take the time to learn about the disabled beneficiary’s individual needs. As a result, many times Special Needs Planning is not custom tailored to the disabled beneficiary’s individual needs. Sometimes this type of planning may be as bad as no planning at all.
Q: What is the purpose of a Special Needs Trust?
A Special Needs Trust is a special type of trust that holds title to property for the benefit of a child or adult who has a disability. A Special Needs Trust allows government benefits eligibility to be preserved while at the same time the special needs child is provided with sufficient assets from your estate to meet his or her supplemental needs (those that go beyond food, shelter, clothing and medical care). A properly drafted Special Needs Trust can fund those additional needs. In fact, the Special Needs Trust must be designed specifically to supplement, not replace, public benefits. Otherwise, the government could attempt to seize the trust assets for repayment of services already provided or determine that the special needs beneficiary does not qualify for future benefits.
Similar to every estate plan, Special Needs Planning must be customized and tailored to accomplish your goals. A thorough analysis of your overall estate plan and the disabled beneficiary’s individual needs is required in order to determine the proper Special Needs Planning for your loved one. There is one thing that is constant in this area of planning: laws dealing with government benefits are constantly changing which requires your estate plan to be kept up date to take into account these changes.
Q: What types of expenses can a Special Needs Trust cover?
The Special Needs Trust can be used for a variety of life-enhancing expenditures without compromising your loved one’s eligibility such as:
- Annual check-ups at an independent medical facility
- Attendance of religious services
- Supplemental education and tutoring
- Out-of-pocket medical and dental expenses
- Transportation (including purchase and maintenance of a vehicle)
- Purchase materials for a hobby or recreation activity
- Funds for trips or vacations
- Funds for entertainment such as movies, shows or ballgames
- Purchase of goods and services that add pleasure and quality to life such as computers, videos, furniture or electronics
- Athletic training or competitions
- Special dietary needs
- Personal care attendant or escort
Q: Who can establish a Special Needs Trust?
While Special Needs Trusts are typically established by parents for their disabled children, any third party can establish a Special Needs Trust for the benefit of a disabled beneficiary. It is important to seek the assistance of competent counsel when creating a Special Needs Trust. Indeed, a poorly drafted Trust can easily be subject to “invasion” by the government agencies who provide benefits.
Q: Our family is wealthy. Do we still need to create a Special Needs Trust?
Yes, you should still establish a Special Needs Trust to protect your disabled beneficiaries from potential creditors. For example, if your disabled beneficiaries are ever sued in a personal injury action, the assets in the trust would not be available to the plaintiffs. Furthermore, because the funds in the Special Needs Trust are not countable as available assets for purposes of determining government benefit eligibility, more of your money can be used for those supplemental expenditures that will allow your disabled beneficiary to enjoy a higher quality of life. Otherwise, much of your assets will be used to pay for private care benefits that are extremely expensive and can drain even significant sums of money over a period of years. If you would like to learn more about how to protect your child or loved one with special needs, please contact us to schedule a free consultation with an estate planning attorney.