Special Needs Trust

If you have a family member with special needs, you face some unique challenges and issues of concern:

  1. How to provide for all loved ones in the family without jeopardizing the special needs person’s eligibility for the means-tested government benefits available
  2. How to design a plan that supplements the government benefits and enhances the life quality of the special needs person;
  3. How to equitably treat other children in the family when doing this planning;
  4. How to make sure there are sufficient funds available at the parent(s) death to continue care for the special needs person;
  5. How to provide proper supervision, management, etc., through a third-party created and funded special needs trust (SNT).

No one likes to think about his or her own mortality, so it’s no surprise that few people put estate planning at the top of their to-do lists.  But to ensure that your wishes are carried out, you need to have an estate plan.  And if your child, spouse or another family member is disabled, an estate plan featuring a special needs trust (also known as a supplemental needs trust) may be even more critical.  If a family member is disabled or has a special need, failure to plan can have disastrous consequences.  For one thing, an inheritance likely will disqualify that person from receiving government benefits that would otherwise help pay for his or her care.

If you have a child with special needs, you likely are looking for the best way to provide for him or her after you’re gone.  If your child is unable to work and requires long-term care or other assistance, the financial burden can be enormous.  A special needs trust can help you enhance your child’s quality of life without making your child ineligible for important government benefits.

A solution is a special needs or supplemental needs trust, because it is designed to supplement, rather than replace, government assistance.  Assets placed in a properly designed special needs trust don’t belong to the beneficiary, so they will not disqualify him or her from Medicaid or SSI benefits. You can fund the trust during life or at death using a variety of assets, including cash, stock, real estate or life insurance proceeds.  The trust doesn’t have to be irrevocable, but a revocable trust may have negative tax consequences, including inclusion of the trust assets in your estate.

To preserve eligibility for government benefits, trust funds must not be used for the child’s support ”” in other words, they should not be used for medical care, food, clothing or shelter covered by Medicaid or SSI.  But they can be used for just about anything the government doesn’t pay for, including rehabilitation and medical care not covered by public benefits, education and training, transportation, insurance, wheelchair-accessible vans, and modifications to the child’s home.

A special needs trust also can be used to pay for quality-of-life expenses, such as travel, recreation, hobbies, entertainment, and stereo and television equipment.