Estate Planning for Parents of Children with Special Needs: Special Needs Trusts

Estate Planning for Parents of Children with Special Needs:

Special Needs Trusts 

Estate planning is important for all families.  It is especially important for those responsible for the care of someone with special needs.  The cost of caring for someone with a severe disability can add up to millions of dollars over a person’s lifetime.  If you are providing financial support for someone with special needs, you should consider ahead of time how that support will continue after you are gone.  It will likely require specialized planning to ensure that a loved one will continue to receive the same quality of care you are providing when you are no longer around.  There are many different techniques available to provide for loved ones with special needs throughout their lifetimes.

A Special Needs Trust (SNT) is a common and effective way for people to provide for a disabled loved one while preserving his or her eligibility for government benefits programs such as Supplemental Security Income (SSI) and Medicaid.  Because the funds in the trust are owned by the trust rather than by the disabled individual outright, they are not considered available funds for the purposes of eligibility for public assistance.  The SNT must be managed by a trustee who will distribute its assets to the person with special needs. The trustee can be a family member, a trusted advisor, or a professional trustee. The funds in a SNT can be used for anything that helps the named beneficiary. However, government benefits programs will review trust expenditures for appropriateness.  SNTs can be testamentary trusts (created in a will) or lifetime (living) trusts.

There are 3 general types of SNTs.  A first-party or self-settled SNT uses the beneficiary’s own assets, such as a court settlement or accumulated funds. A third-party SNT is established by someone other than the individual with special needs and the source of funds are someone else’s assets.  These are commonly set up by parents, grandparents or other family members.  They may be part of a family member’s estate plan that receives funds at the passing of the family member. 

A third type of SNT, a pooled trust, is also funded with the beneficiary’s own money.  It is managed by a nonprofit organization rather than a trustee named by the Trustmaker.  Pooled trusts can be used by individuals whose monthly income or resources would otherwise be too high to qualify for Medicaid.  The funds in the trust can only be used for the benefit of the beneficiary even though the money would have otherwise caused the beneficiary to not qualify for any medical or other assistance.  These different types of SNTs have some additional variations as well, such as where the funds go if there are assets left in the trust when the beneficiary passes away.  You should consult an experienced attorney when deciding which type of trust will best fit your situation.

You should also consider writing a letter of intent as a part of your estate plan.  Such a letter is not a legal document, but it allows parents to share information about how to care for their child with special needs.  Since many children with special needs have trouble expressing themselves, especially children on the autism spectrum, it is important to share details of your child’s routine and his or her preferences.  Write out what your hopes and concern for your child are and how you would like them addressed.  You should also include a full medical history and the contact information for all of his or her healthcare providers.  Please feel free to contact us for a sample of a letter of intent by sending an e-mail to info@weatherby-associates.com and putting “Letter of Intent” in the subject line of the e-mail.

Are you looking for the peace of mind you will feel from knowing that your loved one will be taken care of after you are gone?  We can help you plan for a secure future for your loved one with special needs.  Contact our office at 888-822-8778 to learn more or to schedule a consultation.

Categories: Blog, Estate Planning

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