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Special Needs Trusts Planning

Special Needs Trusts allow for the management and protection of assets without jeopardizing eligibility for essential government benefits like Medicaid and Supplemental Security Income (SSI). Our expert team works closely with you to establish a trust that addresses the specific needs of your family member, ensuring they receive the care and support they deserve without compromising their financial assistance. We guide you through every step, from selecting the right type of trust to understanding the legal requirements and ensuring compliance with state and federal laws. With our Special Needs Trusts Planning, you can rest assured that your loved one's future is secure, providing peace of mind and the assurance that they will continue to receive the benefits and care they need.

If you have a family member or loved one with a disability or special needs, you likely worry about their future. If you get the planning right, your loved one will be provided for and cared for. If you get it wrong, your plan can inadvertently cause your loved one to lose government income and medical care benefits. Advanced Legal Planning can help you design a special needs plan to provide “supplemental needs” for your loved one while ensuring continued government assistance.

What Is A Special Needs Trust?

The government offers assistance for those with special needs to support those who cannot provide for themselves. This assistance comes in the form of “Supplementary Security Income” (SSI) for food and shelter and “Medicaid” for medical care. While this assistance is essential, it only covers the bare necessities of life. If a person with special needs receives financial support from family, friend or charity, the government can revoke these benefits.

When a family member, friend or charity gives assets to a properly drafted Special Needs Trust (also called a Supplemental Needs Trust), the Trust will hold the assets until they are needed to provide for the special needs recipient. The special needs recipient is the “beneficiary” of the Special Needs Trust. This type of Trust has built in restrictions to preserve the recipient’s eligibility for SSI, Medicaid, and other government benefits.

This Trust maintains the special needs person’s qualifications for government benefits while allowing the Trustee the maximum flexibility to use Trust funds to improve the recipient’s quality of life. The Trustee can use trust funds to pay for such things as tuition, travel, tools, cultural events, and companion services.

What Is A Special Needs Trust?

Special Needs Trusts are most commonly used for people who have severe disabling conditions who are receiving, or seeking to receive, the assistance of SSI and Medicaid benefits.

Many disabling conditions are not permanent. Disabling conditions which will last for longer than 12 months often qualify for government assistance. The Special Needs restrictions may be terminated once the beneficiary is no longer considered disabled.

Improper Planning May Harm A Beneficiary

SSI payments are not enough to pay for hobbies or travel to see family. There may be medical issues that are not covered by Medicaid. Many people want to help disabled loved ones in these circumstances.

If assets are given to a disabled person or left in a Will for a disabled loved one, that gift may immediately disqualify the recipient from all government assistance (SSI, Medicaid, Section 8 Housing). Even worse, the disabled person may have to repay benefits.

A gift without proper planning may cause your loved one to lose his or her

Income
Medical Coverage and
Housing

Two Types Of Special Needs Trusts

There are two types of special needs trusts – first-party and third-party special needs trusts. If a person will use his or her own money, then it is a first-party trust. If another person is putting money into the trust, then it is a third-party trust.

Third Party Special Needs Trust

There are two types of special needs trusts – first-party and third-party special needs trusts. If a person will use his or her own money, then it is a first-party trust. If another person is putting money into the trust, then it is a third-party trust.

Third Party Special Needs Trust

Third-party Special Needs Trusts are commonly used by persons who do pre-planning for a loved with special needs. Typically, the parents of a child with disabilities or special needs will be the persons who establish a third-party SNT, although a grandparent, a sibling, or any other person (other than the beneficiary) may establish a third-party Special Needs Trust.

A Special Needs Trust may be designed to provide benefits to a disabled person during life or as a beneficiary at death.

A third-party Special Needs Trust has fewer restrictions than a first-party special needs trust. A third-party Trust can name successor beneficiaries you choose.

Advanced Legal Planning can help you design a Special Needs Trust that supports your goals while maintaining the maximum amount of flexibility allowed under law.

First Party Special Needs Trust

Unlike a third-party Trust, a first-party Trust contains assets provided by the disabled person. This kind of trust is commonly used in situations when the person with a disability inherits assets or receives a financial settlement. These trusts are also useful when a person owns assets and later becomes disabled, requiring government benefits.

Property in a first-party Special Needs Trust can only be used for the sole benefit of the special needs beneficiary.

Unlike third-party Special Needs Trusts, when a disabled person with a first-party Trust recovers or dies, any remaining funds must be paid back to the State for reimbursement of medical care expenses.

Case #1

Jeanne’s daughter, Cassie, has been diagnosed with schizophrenia.
In Jeanne’s estate planning, she creates a Special Needs Trust for Cassie and purchases a life insurance policy to fund it.
Jeanne asks Cassie’s adult sister, Susan, to be the successor Trustee when Jeanne dies. Susan thinks it is a great idea to take care of her sister this way and decides to buy a life insurance policy of her own to provide extra help and names Cassie as the beneficiary.
When Jeanne dies, Susan comes to Advanced Legal Planning to make sure that she is doing things properly.
Advanced Legal Planning explains the dangers of naming Cassie as the beneficiary of the life insurance policy and advises Susan to change the beneficiary of the policy to the Jeanne’s Special Needs Trust so Cassie does not inadvertently lose her government benefits from directly receiving life insurance proceeds.

Case #2

Pete suffers from PTSD and is unable to work.
Pete receives Supplementary Security Income (SSI) and Medicaid and is the beneficiary of a Special Needs Trust.
Pete owns a car that he uses for everyday transportation. A person receiving SSI or Medicaid is allowed one vehicle.
Pete loves riding motorcycles. He feels it is therapeutic. If the Trustee of Pete’s Special Needs Trust registers a motorcycle in Pete’s name, Pete will lose his SSI and Medicaid eligibility. A motorcycle is a “countable resource.” Its value would exceed the resource limit. Advanced Legal Planning advises the Trustee to purchase the motorcycle and own it within the Special Needs Trust. Pete can be allowed to use the motorcycle, but because Pete is not the owner, he still qualifies for his benefits.

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FAQS

What is estate planning, and why is it important?

Estate planning is the process of structuring your assets to ensure they are distributed according to your wishes after your passing or incapacitation. Estate Planning helps you minimize taxes, avoid legal disputes, provide for your loved ones, and maintain control over your financial affairs. Proper Estate Planning can also protect your beneficiaries from creditors and other potential risks.

What documents are typically included in an estate plan?

Key estate planning documents include a will, trusts, a financial power of attorney, a healthcare power of attorney, living will, beneficiary designations, and guardianship designations. Each document serves a specific purpose and can be customized to suit your unique circumstances and goals.

How often should I review and update my estate plan?

It is generally recommended to review and update your estate plan every 3 to 5 years or after significant life events such as marriage, divorce, birth of a child, death of a beneficiary, or substantial changes in your assets or financial situation. Regular reviews ensure that your estate plan remains current and accurately reflects your wishes.

One way to make sure your plan is up to date is to join a maintenance program. A maintenance program assures your plan is being reviewed regularly and gives easy access to an attorney if you have any questions or need any changes.

What happens if I die without a will or estate plan in place?

If you pass away without a will or estate plan, your assets will be distributed according to your state’s “intestacy ” laws, which may not align with your preferences. This can lead to family disputes, increased legal expenses, and increased hardship for your loved ones. It is crucial to have a well-crafted estate plan in place to ensure your wishes are honored.

Can I create my own estate plan, or should I consult with an attorney?

While it is possible to create your own estate plan, working with an experienced estate planning attorney is highly recommended. An attorney can help you navigate complex legal requirements, identify potential issues, and create a customized plan that addresses your unique circumstances and goals. This ensures that your estate plan is effective and legally sound. This provides peace of mind for you and your loved ones.

What is the difference between a revocable trust and an irrevocable trust?

A revocable trust is a flexible legal arrangement that allows you to maintain control over your assets during your lifetime and make changes to the trust as needed. Upon your death, the trust becomes irrevocable, and assets are distributed to your beneficiaries.

An irrevocable trust, on the other hand, is a permanent arrangement that cannot be altered or revoked once established. Irrevocable trusts offer greater asset protection and tax benefits but require you to relinquish control over the assets placed in the trust. An experienced Estate Planning attorney can create “some” flexibility to an irrevocable trust while maintaining its benefits.

How can elder law and Medicaid planning help me and my family?

Elder Law and Medicaid Planning involve navigating the complexities of aging, long-term care, and government assistance programs. By working with an experienced attorney, you can develop a strategy to secure quality care, preserve your assets, and expedite your eligibility for Medicaid benefits. This process can help alleviate financial burdens and provide peace of mind for you and your family.

What is special needs planning, and why is it important?

Special needs planning is the process of creating a comprehensive plan to support a loved one with special needs, ensuring their long-term well-being and financial security. This can involve establishing a special needs trust, selecting appropriate guardians, and identifying government benefits and resources. Proper planning can help your loved one maintain their independence, quality of life, and access to essential support services.

What is the role of a trust administrator, and what are their responsibilities?

A trust administrator, also known as a Trustee, is responsible for managing and distributing trust assets in accordance with the terms of the trust agreement. Their duties may include investing assets, paying taxes, maintaining records, communicating with beneficiaries, and addressing any legal or financial issues that arise. Trust administration requires a thorough understanding of fiduciary responsibilities and trust laws to ensure compliance and protect the interests of the beneficiaries.