Families who are faced with the often overwhelming financial, logistical and emotional challenges that come when a family member has special needs use these trusts to protect their child's quality of life.
A young couple who wisely had an estate plan created while their children were very young returned to estate planning when one of their children developed a chronic and debilitating illness at age 3. Their lives changed dramatically, and their estate plan did also.
CNBC's article, "Special-needs trust is key part of some estate plans," says that many couples in this situation will revise their estate plan and create a special needs trust to benefit a disabled child. Special needs trusts, also called supplemental needs trusts, can be a very important estate planning tool for parents of children who are likely to need special care and financial support throughout their lives.
Special needs trusts answer the question of how to pass on assets to a disabled child without jeopardizing his or her eligibility for means-tested government benefits like Medicaid, Medicare and Supplemental Security Income. In fact, disabled individuals with as little as $2,000 in available assets may not be eligible for some public programs. However, assets held in special needs trusts don't count toward eligibility calculations for public benefits.
The money in a special needs trust can go towards items not covered under government programs. This can include dental work, eyeglasses and caregiver charges. It can also be used to pay for enrichment—such as trips to visit family members and specialized educational programs.
An experienced estate planning and elder law attorney should draft the special needs trust. This should be an attorney who knows and works in special needs planning and government benefit programs for the disabled. A poorly drafted trust can lead to serious consequences for disabled beneficiaries.
These trusts are often created when a disabled child reaches the age of maturity. At this time, parents have a better idea of the type of support available to the child and whether he or she will be financially independent, have the mental capacity to make financial decisions, and have the ability to live independently.
are required to act in the best interest of disabled beneficiaries. They also should be able to understand and comply with trust administration rules and guidelines. Parents should also select a trustee who knows the disabled child and is willing to comply with their wishes for that child. These can be detailed in a letter of intent that accompanies a special needs trust. Trustees are usually family members who care for a disabled relative after his or her guardian dies, but sometimes these trusts are managed by corporate trustees.
Special needs trusts are not just for wealthy families. They may actually be more important for an average income family facing the enormous costs of caring for a disabled child. These families need to discuss their planning with family members. A well-meaning relative who leaves the child a sizeable amount of money could put the child's ability to receive government resources in jeopardy, thereby undoing all of the planning. Speak with an estate planning attorney who has experience in this specific area to protect your child and you family.
Reference: CNBC (June 1, 2016) "Special-needs trust is key part of some estate plans"