Special Needs Trust
One of the most important parts of an estate plan that includes a relative with a disability is a Special Needs Trust (SNT). It is crucial that families understand the reasons for these trusts, the benefits and requirements and the responsibilities of a trustee. A SNT can provide for your loved one’s needs without jeopardizing his or her eligibility for benefits and entitlements, such as SSI and Medicaid. A SNT allows your loved one to maintain eligibility for these benefits while enjoying the quality of life intended by you.
Special needs trusts are discretionary, spendthrift trusts created for the elderly or individuals with disabilities. They are intended to supplement, but not replace, any public benefits that the trust beneficiary receives, such as SSI, Medicaid, subsidized housing and other programs. The requirements and terms of the trust can vary substantially depending on the public benefits program and state. In some states, for instance, self-settled SNTs cannot be established for certain Medicaid program eligibility with the individual’s own funds when the person is 65 or older. The special needs trust can be used to supplement the government benefits by paying for items, services and equipment that Medicaid will not cover, such as the purchase of a home, special wheelchairs, handicap-accessible vans or mechanical beds. It will also pay for limited travel, a personal attendant, and other recreational and cultural experiences. The trust can be specifically tailored to enrich the beneficiary’s life.
The central purpose of a Special Needs Trust is to set aside assets for a disabled beneficiary without elimination of the beneficiary’s eligibility for “needs based” public benefits such as SSI or Medicaid. A Special Needs Trust can accomplish this because the Social Security Administration does not count Special Needs Trusts as assets of a SSI or Medicaid recipient. This is only the case if the trustee has full discretion of time, purpose and amount of distributions.
There are several options for setting up a Special Needs Trust so it is important to consult with an attorney knowledgeable in SNT’s and estate planning. Also, laws governing estates and trusts change regularly so if you spend your money creating a SNT you want to be sure it is handled properly.
It is also important is to be sure your money is invested with the needs of your family member in mind. A non-disabled person’s needs change throughout their life and adjustments to investments are made accordingly. Investing for a disabled family member requires the same diligence. If your funds are already invested, we will work with your current financial adviser to be sure your investments are managed according to your wishes.
Remember that any trustee, family member, individual or corporate trustee, is entitled to a commission for their services and that fees will apply to bank accounts and investment accounts owned by the trust, as they would for a personal banking or brokerage account.
There is always an inclination to appoint family members as successor-trustees of Special Needs Trusts. Many trusts fail because of ill equipped trustees, no matter how well intentioned. While appointing a family member may be convenient and seem like the best thing to do, private professional trustees and even banks who serve as trustees often outperform family members in the same role. In addition, the need for attorney advisement and the risk of a benefits battle is greatly reduced when a trust is directed by an experienced professional trustee. With the exception of smaller trusts, professionals are better equipped to handle the job. Most corporate trustees or banks require a minimum amount in a trust for it to be cost effective.
If you need a financial adviser, financial planner, or an attorney, we will provide you with the name of a vetted referral or we can provide you with a checklist to assist you in identifying a suitable professional. A carefully thought out financial plan identifies and incorporates an attorney, a financial planner, and a trustee. It will identify how much money a beneficiary needs in supplementary income. With proper legal and financial planning, the family can rest assured that the person with the disability will enjoy a comfortable lifestyle after the parents are gone.
Advance Housing Special Needs Management LLC has expertise in working with people with disabilities. We are knowledgeable of the social service systems that support them. We strive to make planning fit the individual instead of having your individual fit our plan. We are experienced in talking through the complex aspects of special needs planning. This makes us highly qualified to effectively plan for the future for your loved one.