For anyone who has a loved one with special needs or a disability, a special needs trust is something very useful to consider as part of their estate plan. A special needs trust can be used in order to provide resources for your loved one so you can be sure to continue providing their support and care in the case of your death or incapacity.
What is a Trust?
The basic purpose of a trust is to protect the assets you place in trust for the future benefit of your heirs or beneficiaries. Using a trust allows you to determine how the trust assets will be handled. A very common reason many people use trusts is to set aside money for children or grandchildren until they reach the age of majority.
What makes it a special needs trust?
A “special needs trust” is a particular type of trust meant to be used for the benefit of someone with special needs or disabilities. It is always wise to plan ahead for the future care and needs of a disabled loved one, in the event that the caregiver is unable to continue serving in that capacity.
Two kinds of special needs trusts
The purpose of special needs trusts is to guarantee future care and support for individuals with special needs or disabilities. Therefore, the kind of trust you may need to create depends on the type of care and support you are looking to provide. Your options include the General Support Special Needs Trust and the Supplemental Care Special Needs Trust.
A General Support Special Needs Trust is most often considered the primary source of benefits for a disabled individual. Unfortunately, assets included in this type of trust could potentially be used to disqualify the beneficiary from receiving need-based government benefits, such as Medicaid.
The most common type of Special Needs Trust is for Supplemental Care. This type is meant to provide secondary support once government benefits have been exhausted. This allows the individual to maintain eligibility for Supplementary Security Income (SSI) and Medicaid, while providing for all other needs that SSI and Medicaid do not provide.
Individuals with continuing special needs
Special needs trusts can also be used for the benefit of individuals who have a permanent or severely disabling condition, such as blindness, chronic mental illness, paralysis and developmental disabilities. Those people are usually automatic beneficiaries of government benefits.
Individuals who do not require government assistance
Most of us cannot know for certain whether our loved ones will need SSI or Medicaid. For that reason, it is wise to create a special needs trust just in case. That way, you won’t have to be concerned about your loved one receiving an inheritance that will affect their eligibility for government benefits. Most Special Needs Trusts are drafted in a way that gives the trustee the power to end the trust when it becomes unnecessary.
Individuals who cannot manage their own finances
For those who are incapable, for any reason, to wisely manage an inheritance, a special needs trust can be quite useful. Trusts created with this goal in mind are often called “spendthrift” trusts, because they are used to keep assets out of the hands of a beneficiary and in the control of a trustee. For example, someone with mild developmental disabilities, mild autism, attention deficit disorder, or bipolar disorder might benefit from this type of trust because it can prevent reckless spending. Special Needs Trusts are complicated legal instruments, and must be worded properly in order to be considered valid. Therefore, you should consult an experienced estate planning attorney to establish your Special Needs Trust.
How much does it cost to create a special needs trust?
Most special needs planning attorneys charge a flat rate for the services they provide. However, each client’s needs are different and the complexity of the required documents can vary. So, it is often difficult to provide a list of services and applicable rates. The cost to set up a special needs trust will also vary, depending on the complexity of the trust. Set up fees can run thousands of dollars, in many cases. Also, depending on who you choose as the trustee, you may be charged a small percentage of the funds for the trustee to manage and distribute them.
If you have questions regarding special needs trusts, or any other estate planning matters, contact Gaughan & Connealy for a consultation either online or by calling us at (913) 262-2000.