SPECIAL NEEDS TRUSTS: YOUR QUESTIONS, ANSWERED

“What are Special Needs Trusts (SNT)?”

Firstly, a trust is created when property (real estate, finances, tangible items) is managed by a person for another person’s benefit. The person managing the property is called the “trustee.” The person whose benefit it is for is called the “beneficiary”. The trust lasts as long as it is needed. This usually means the trust will go on until the beneficiary’s death or until the funds are expunged.

disabled-person

Now, special needs trusts are made specifically for the benefit of those with physical and/or mental disabilities, including those with mental disabilities who lack the capacity to manage their own finances. The trust is created with the specific needs, lifestyle, and future of the beneficiary in mind.  Often, special needs trusts are established to receive assets from a legal settlement, especially if the recipient is a minor. Other special needs trusts are established via an estate plan when parents or other family members want to provide assets or life insurance proceeds at their own death as an inheritance for someone with special needs.

“Who Can Be A Trustee in A SNT?”

The trustees of special needs trusts can be family members or, if an appropriate and trustworthy family member is unavailable, a third party will be appointed by the court. Choosing the right trustee must be done very carefully, especially for special needs trusts that are used for the benefit of a younger person.

“Why Should We Have a SNT?”

Having a SNT means having the comfort and ease of mind knowing that your loved one has proper asset and income management, will have good financial and healthcare decisions made on their behalf, access to quality care, and most importantly, be able to continue to receive government benefits providing relief (SSI, SSDI, Medicaid/Medicare). Funds in this trust don’t count as beneficiary’s resources (Resource Test) and can provide continuing management when family is no longer available. Your loved one will have potential for greater independence by maximizing private and public resources. Other planning can lead to uncertain outcomes regarding a special needs beneficiary’s future.

By choosing to plan for yourself or a loved one now, you’ll avoid these costly mistakes, such as disinheriting the child, relying on your other children to provide for the child with special needs, failing to provide privacy, and choosing the wrong professionals.

“Will I or My Loved One Lose Governmental Benefits If I Have an SNT?”

SNTs allow you to benefit someone with special needs without disqualifying them for governmental benefits. Federal laws allow special needs beneficiaries to obtain benefits from a carefully crafted trust without defeating eligibility for government benefits.

“How Much Should I Put in the Trust?”

There are many variables that the family must take into account, such as life expectancy, changes in benefits, and housing needs. There are two important figures to keep in mind: (1) the amount needed to utilize government support for quality residential programs and services, and (2) the assumption that there will be fewer, if any acceptable services.

If your trustee is a child, these figures can only be estimates at this point. As the Trustee gets older, you will be able to more precisely identify the actual costs. The Belleh Law Firm can assist you with this process.

“Are There Different Types of Special Needs Trusts?”

Yes, in fact, there are quite a few different types. You have revocable and irrevocable trusts, first (or “self-settled”) and third Party SNTs, and pooled trusts. They may be funded and managed by family, a third party, or yourself. There are different legal statutes and taxation laws governing these, and at our firm, we can help you determine what may be the best for you or your loved one’s situation.

“What about Taxes?”

First, benefits income is not the same as taxable income. This concept is often confused by Social Security and Medicare workers – you must be prepared to educate them about their own rules. For purposes of trusts and taxable income, distribution of income is either distribution directly to, or for the benefit of the beneficiary. For purposes of “needs based” benefits, income is cash, or anything that can be used for food/shelter. Many SNTSs are taxed incorrectly. If you can get a good tax result, as well as a good benefits result – you are providing superior services.

In Our Office

A special needs trust can provide an extra measure of safety and peace of mind knowing that your loved ones are taken care of. Now, more than ever, governmental programs providing assistance and benefits to those with special needs are being dismantled or their funds slashed. What’s more, having a SNT will allow you to have additional options, flexibility in changing circumstances, a focus on advocacy and asset protection, and assistance in managing your beneficiary’s funds.

Posted in Estate Planning.

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