Hyden, Miron & Foster, PLLC Law Blog

Saturday, January 20, 2018

Top 5 Things To Know About Special Needs Trusts

When it comes to planning for the continued care of a child or adult with special needs, there are a myriad of details to consider. How much of your legacy can you leave them? Can you do it without jeopardizing crucial government benefits? These are all questions that can be answered by a special needs planning lawyer. Consulting is lawyer about special needs planning is the second step. The first step is understanding some basics about Special Needs Trusts.

  1.  What is a Special Needs Trust?
    A Special Needs Trust is a tool that allows parents or guardians to leave certain assets to children or adults with special needs, without risking the loss of needs-based government benefits. These types of trusts are also called Supplementary Needs Trusts because they are designed to allow for income to supplement needs not already provided by the government. There are a variety of types of Special Needs Trusts, including:

    • First Party Special Needs Trusts (funded by the individual with special needs)
    • Pooled Trusts (managed by a nonprofit, assets are pooled with other beneficiaries)
    • Third Party Special Needs Trusts (funded by parents, relatives or friends)

  2. What Can’t Income in a Special Needs Trust be used for?

    To avoid jeopardizing government benefits like Medicaid and SSI, income from Special Needs Trusts should not be used to pay for things like:

    • groceries
    • rent
    • home owners insurance
    • mortgage
    • HOA Dues
    • utilities
    • property taxes
    • cash gifts
      Providing income for these types of things may cause a one-third reduction in SSI benefits.

  3.  Other Relatives May Help Fund a Special Needs Trust

    Just because an individual has special needs and is the recipient of needs-based government benefits does not mean that the individual should be disinherited. Grandparents, aunts, uncles, siblings and friends may coordinate their estate-planning to fund a single third party-created special needs trust.

  4. Some Special Needs Trusts Must Have a Pay On Death Provision

    In item #1, we talked about the different kinds of special needs trusts. Third party special needs trusts are not required to have a payback provision. First party special needs trusts, on the other hand, are required to have a payback provision. This means that when the beneficiary of the trust dies, the remaining trust assets must be used to pay back any benefits used by the beneficiary before they can be distributed to other relatives.

  5.  Special Needs Trusts Require Trustworthy Administration

    As with any trust, it is critical to find a trustee for the special needs trust that is well-suited for the position. This means that the candidate should be:
  • Relatively savvy regarding special needs trust requirements
  • Capable of understanding the laws governing distribution of trust assets for individuals with special needs
  • Willing to serve faithfully in the capacity of trustee
  • Able to enlist the help of legal and tax advisors during the administration of the trust

If you care for an adult or child with special needs and are concerned about their care, call us today to arrange a case consultation with an experienced estate-planning attorney at Hyden, Miron & Foster, PLLC.

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