Special Needs / Disability Planning

Special Needs Trusts: What Every Parent Needs to Know

When a person hires an attorney to do their Estate Planning they want to provide for themselves and their loved ones during their lifetime, and upon their incapacity or death give what they want, when they want, and if they can save every last fee, tax or court cost possible.

When a person has a disabled child they want their child to live as independently as possible in the family home. If it is possible they would want the child to work because that is probably the disabled child’s dream.

When a disabled child turns 18, the government treats them as an adult. An adult disabled prior to age 22 is entitled to SSI benefits, provided they have less than $2,000.00 in assets, and their income is less than the amount they receive in SSI benefits.

There are other benefits available, however the benefit that requires special Estate Planning is the SSI benefit, and to discuss the different benefits available would be too confusing.

This article discusses the ability families have to preserve this benefit which gives the disabled persona access to medical benefits while providing the child with the ability to live as independently as possible, perhaps even in the family home.

Most financial planning professionals are taught the benefits of estate planning with a Revocable Living Trust. Living Trusts avoid Probate, and Court Fees, and can be designed to reduce or eliminate Estate Taxes.

An attorney who understands public benefits, and planning for the disabled can prepare a special kind of Trust specifically designed to pass an inheritance to a disabled child. These Trusts are called Special Needs Trusts, or Supplemental Needs Trusts.

A SPECIAL NEEDS TRUST can be contained inside a Revocable Living Trust, or created as a separate Trust enabling other family members to contribute either through their Living Trust, or by making annual gifts.

A SPECIAL NEEDS TRUST can be used to provide for many things. The SSI benefit is specifically designed to provide for food and shelter.

The Trustee of a SPECIAL NEEDS TRUST may buy things for the beneficiary such as Wheelchairs, Vans, toiletries, computers, and pay for caregivers with out any reduction in the SSI benefit.

If the Trustee provides food or shelter, the SSI benefit will be reduced, but not eliminated. This year providing shelter through a SPECIAL NEEDS TRUST reduces the benefit $231.00. The benefits of this kind of Trust can not be underestimated

It is critical that a family with a disabled child avoid some common Estate Planning mistakes. If a family establishes a Uniform Transfers to Minors Act account, the child will be entitled to the funds and their benefits can be reduced or eliminated, worse the child could blow the money.

If the money in the account is substantial a Court Ordered Trust may be required, this will result in substantial court costs and attorney fees, and the Court may require reimbursement for Medi-Cal benefits. If a person on SSI is the direct beneficiary of a retirement plan, insurance plan their SSI benefit could be reduced or eliminated.

Likewise if they receive an inheritance they will lose benefits until the inheritance is spent, unless it can be converted to an exempt asset.

A SPECIAL NEEDS TRUST must meet specific requirements in order to protect the disabled beneficiary. The Trustees selected must understand how public benefits work, and how to make distributions in a manner that will not reduce or eliminate benefits.

The SPECIAL NEEDS TRUSTS may be designed in a manner so that the Trust can be dissolved if it becomes unnecessary.

A SPECIAL NEEDS TRUST can hold life insurance benefits, 529 plans and can receive IRA benefits in a manner that allows the IRA to be stretched out over the lifetime of a the beneficiary.

The opportunities to assist families of disabled children through the use of SPECIAL NEEDS TRUSTs are many and very rewarding.

If you would like more information about Supplemental or Special Needs Trust or would like to hear a presentation on planning for disabled beneficiaries please contact Martha Jo Patterson at (855) 99ELDER or (855) 993-5337

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