SPECIAL NEEDS TRUST AND ESTATE PLANNING
What is a special needs trust?
A Special Needs Trust holds assets for the benefit of an individual who is receiving or may receive public benefits such as Supplemental Security Income (SSI) and Medicaid. If properly drafted, having assets in this trust does not disturb the person’s eligibility for public benefits.
When does it make sense to set up a special needs trust?
If you have a child with disabilities—such that your child is unable to work and hold a job – 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. Trusts are created every day that will ultimately hold as little as $30,000 and trusts have been created that hold as much as $3.4 million.
Does the special needs trust for my child with disabilities or family member replace my living trust?
No. Your living trust will continue to hold your assets as long as you live. In most cases, the child with special needs inheritance will be distributed from the living 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?
Typically, the trust is funded or receives money only upon your death. Grandparents or other relatives might leave something to this trust, as well. You might also decide 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 appropriated advice.
What can 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 beneficiary 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 special needs child’s brother or sister and let the sibling take care of the money?
It is important to have funds segregated and irrevocably devoted to the child with disabilities. A sibling, however well meaning, could face a divorce or be sued or die before his sibling with disabilities. In any of there 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.
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 that the Medicaid program paid for the child’s medical care?
That is correct. When the parents establish a trust for a child, which is most typical, the state typically does not get its money back.
If a person with special needs inherits money, can a special needs trust help?
Yes. In most circumstances, an individual with special needs 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 or she 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 Medicaid benefits that it pays.
Bottom line: If you have a child with special needs, this trust is a good option. It is an essential part of your estate plan.
Courtesy of: Adrienne Arkontaky, EsqAgency: Littman Krooks LLPWebsite: www.littmankrooks.comEmail: aarkontaky@littmankrooks.comPhone: 914-684-2100
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