If you are considering creating a special needs trust for a loved one, you’re in good company. More families than you may realize have at least one member who is disabled physically, intellectually, or emotionally and requires extra foresight when it comes to matters of estate planning. Below are some common questions people ask experienced estate planning attorneys about special needs trusts and the answers.
Why should I create a special needs trust?
Special needs trusts are designed to protect family members who are not capable of working and/or managing their finances without help. They may not understand how to handle money on a day-to-day basis or how to save for a rainy day. They also may not be able to navigate the complicated pathways to receiving government benefits they are eligible for or protecting those benefits from being lost if they receive an inheritance. Setting up a special needs trust will provide for their future, even if you predecease them.
Do I need an attorney to establish a special needs trust?
While theoretically you can create a special needs trust without a skilled attorney, in reality you would be foolish to try. If you want to have the process go smoothly and the trust to take care of potential problems, be appropriately worded to be legally binding, and be a document you can trust will protect your loved one in your absence, you should hire a professional. Using templates off the internet for the task can be risky. There is just too much at stake.
If my loved one is entitled to government benefits, why are those benefits at risk?
Social Security disability benefits (SSDI) and Medicaid or other benefits like food stamps or housing subsidies are distributed to individuals deemed to be in need of financial support because they are disabled and unable to work for substantial gainful activity (SGA). Receiving an inheritance could, therefore, jeopardize your loved one’s public benefits. If a substantial amount of money goes into the disabled individual’s bank account, she or he will likely have too many assets to remain entitled to government assistance.
Who will control the money in the special needs trust?
When your estate planning attorney helps you to create a special needs trust, part of that process is designating a trustee who will manage the trust. Typically, the trustee is a close relative, most likely you, i.e. the person who sets up the trust (known as the grantor or settlor). Creating the trust also involves designating another trustee if the original trustee becomes incapacitated or dies.
Can a special needs trust have two trustees?
Yes. The responsibility of being a trustee may be shared with a fiduciary professional who is adept at managing money wisely. Such a co-trustee should be completely trustworthy and there should be provisions made to pass the baton to another fiduciary in case this becomes necessary.
Are there restrictions about which expenses the special needs trust can pay for?
Yes. Since government benefits are meant to provide sustenance, the trust is not meant to provide basic housing or nourishment. Nonetheless, your special needs trust attorney may be able to set up the trust so that your loved one can live in your home and have a motor vehicle. Generally, the trust is meant to provide extras not covered by the government subsidy.
What are examples of such “extras”?
Depending on the insurance coverage the disabled person has, the trust fund may be used for co-pays or out-of-pocket medical, dental or rehabilitation expenses. The money you have set aside may also be used to enrich your loved one’s life by providing, for example:
- Educational and/or recreational activities
- Personal care or companionship
- Outings to a museum, an amusement park or the zoo
- Meals in a restaurant
- Vacations
- Extra clothing or furniture
What are the benefits of creating a special needs trust?
A special needs trust helps to ensure the comfort and security of a beloved person whose life has been made difficult by living with a disability. It will not only protect your loved one’s legitimate benefits, but can mean the difference between a relatively sparse existence and one full of warmth and color you provide.
©Surprenant & Beneski, P.C. 35 Arnold Street, New Bedford, MA 02740, 336 South Street, Hyannis MA 02601 and 45 Bristol Drive, Easton MA 02375. This article is for illustration purposes only. This handout does not constitute legal advice. There is no attorney/client relationship created with Surprenant & Beneski, P.C. by this article. DO NOT make decisions based upon information in this handout. Every family is unique and legal advice can only be given after an individual consultation with an elder law attorney. Any decisions made without proper legal advice may cause significant legal and financial problems.