Do You Need a Special Needs Trust For an Impaired, Disabled or Incapacitated Child or Adult?
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If a child, grandchild or special friend is disabled or suffers from a medical condition that qualifies (or may qualify) him/her for governmental financial assistance, you can still gift them money and assets…if you do it the right way. Do it the wrong way and it will all go to the State. We’ll show you how to give and protect your gifts through a Special Needs Trust.
Millions of Americans have disabled family members. The cause may be a serious personal injury accident, Down's Syndrome, schizophrenia, cerebral palsy, autism, multiple sclerosis or countless other physical or mental illnesses.
Even if you don't have a disabled family member, you know many individuals who do. Mental and physical problems do not discriminate against particular racial or socio-economic groups.
If you have a child (young or older), in particular, who is disabled, or if you know someone who does, you simply must know about Special Needs Trusts. These trusts are designed to hold assets for the benefit of an individual who is receiving public benefits and to help that person without causing disqualification.
If the person is receiving Supplemental Security Income (SSI), Social Security Disability (SSD) or some form of state aid, they will continue to do so with a properly drafted Special Needs Trust. If they are in subsidized housing, they would continue to live there.
Why use a Special Needs Trust for a disabled individual?
1. The disabled beneficiary will keep his/her income (SSI or SSD) and health care benefits.
2. Money in the trust can be used to pay for items and services not covered by public benefits
3. Money in the trust can be used to pay for a doctor who will not accept Medicaid.
4. Parents control where trust assets go before and after the child is deceased.
The only alternatives to the Special Needs Trust are (1) leaving nothing to the child; or (2) leaving money in trust that does not have these restrictions. Selecting choice (2) will cause the loss of public benefits. After the assets are consumed, the child will go back on public benefits. In planning these trusts, there are tax and family issues to address.
Consult With A Special Needs Trust Attorney
A Special Needs Trust (SNT) is the ideal planning tool if you have a disabled child or other family member who is disabled. It holds assets for a disabled person without disturbing eligibility for public benefits. SNT assets are used to supplement public benefits. The trust pays for items and services that the public benefits system does not provide.
Do You Have A Disabled Child Or Other Family Member?
Here are some commonly asked questions and answers.
When Does It Make Sense To Set Up A Special Needs Trust?
If you have a disabled child - such that your child is unable to work and hold a job or is able to only work part-time and in a limited position- the Special Needs Trust should be part of your estate plan.
Is There a Limit to the Number of Dollars That Can Be In This Trust For The Benefit Of A Disabled Person?
No. We have created trusts that will ultimately hold as little as $30,000 and we have created trusts that hold in excess of $1,000,000.
Does The Special Needs Trust For My Disabled Child Or Family Member Replace My Will Or Other Trusts I’ve Set Up?
No. Your existing will or trust will continue to hold your assets as long as you live. In most cases, the disabled child's inheritance will be distributed from either your will or existing trust to the Special Needs Trust at the time of your death.
Will Money Go Into The Special Needs Trust For My Child While I Am Living?
It can if you want to set it up that way. Typically, the trust is funded or receives money only upon your death, but many people prefer to set up SNTs while alive, especially grandparents or parents of adult disabled persons.
You might also decide whether to gift or transfer money into the trust while you are living. Doing so raises a number of tax issues about which you must obtain appropriate advice.
What Can The Money In The Trust Be Used For?
Generally speaking, money in the trust can be used to pay for items and services that are not provided to the person by the public benefits system. For example, money in the trust can buy the beneficiary a television or pay someone to be the individual's companion while at home or while on a trip.
Why Should I Bother With The Trust? Why Not Leave Everything To My Disabled Child’s Brother And Let His Brother Take Care Of The Money?
It is important to have dedicated funds irrevocably devoted to the disabled child. His brother, his sister or other family members, however well meaning, could face a divorce or be sued or die before his disabled sibling. In any of these circumstances, the money could be lost and become unavailable.
Who Should Be The Trustee Of A Special Needs Trust?
The trustee should be someone who is very responsible and who will be devoted to the beneficiary. This is often a relative, although it can be a professional fiduciary or "professional trustee" if no family member is available. This is a very complicated question that you must discuss with your attorney who understands these types of trust.
What Happens With Money Remaining In The Trust When The Beneficiary Dies?
If you create this trust for the benefit of your child, money remaining in the trust goes to individuals you name in the Special Needs Trust. It is up to you. Alternatively, remaining assets can go to your favorite charity.
Does This Mean That The State Will Not Be Paid Back The Money For The Child’s Medical Care?
That is correct, most times. When parents establish a trust for a child, which is most typical, the state does not get its money back.
If A Disabled Person Inherits Money, Can A Special Needs Trust Help?
Yes. In most circumstances, a disabled individual who is receiving public benefits can shift inherited assets - or other assets he receives - into such a trust without disturbing eligibility for public benefits. The trust will typically be created by his parents or through the Courts. He cannot establish it himself, although his money can go into it. If this is done, the state does have the right to reimbursement for any benefits that it pays.
Bottom Line: If you have a disabled child, or a loved one who is receiving or may receive public benefits, this trust is right for you. It is an essential part of your estate plan.
Call our managing partner, Fredrick P. Niemann, at 732-863-9900 or e-mail him at fniemann@hnlawfirm.com to discuss your needs and/or to set up an appointment.