As difficult as estate planning can sometimes be for average families, it can be exponentially harder for families who must provide for a loved one with a disability or other special need. When you have to plan an inheritance for an heir with special needs, you have more things to consider than just picking the right guardian or trustee, fully funding a trust, or establishing an orderly distribution schedule. You also need to worry about the impact that your gift could have on that person’s ability to receive necessary government benefits for housing, medical treatment, and other expenses. To make your estate plan work right for your disabled loved one, you should consider a special needs trust.
What is a Special Needs Trust?
A special needs trust is exactly what the name suggests: a trust designed to help you manage inheritances for loved ones who have special needs. These trusts are made necessary by the stringent requirements associated with eligibility for many government programs. If you were to leave an inheritance for an heir who is dependent on government benefits, your gift could push him or her over the income or asset limits that must be met to remain eligible for those programs.
For instance, if you have an heir with special needs and that person is dependent upon Medicaid for health insurance coverage, even a relatively small cash inheritance could cause him to lose that eligibility. And that could be disastrous from a health care standpoint, since he or she would later have to re-qualify for benefits – something that isn’t always as easy to do as some might assume. The best option is to ensure that your gift doesn’t interfere with those benefits at all.
Special needs trusts are often referred to as supplemental trusts, since that is essentially what they are designed to accomplish. Instead of being an easily-accessible trust fund that your heir can access whenever he or she chooses, a special needs trust is designed to provide discretion for the trustee to determine how funds should be spent to benefit the beneficiary. More importantly, these trusts are created only to provide supplemental assistance for things that government benefits never cover.
How Can a Special Needs Trust Help?
A special needs trust provides a vehicle for ensuring that your disabled heir receives as much benefit from his or her inheritance as possible. When you select the trustee, you are choosing the person who will be charged with managing the trust funds and spending money in ways that benefit the heir. And let’s be clear about one point: the trust is set up so that the heir has no control over those funds. He can ask for money to be spent on his behalf. He can beg for that expenditure. He can even demand it. In the end, though, only the trustee can agree to spend any trust assets.
That characteristic is vital to maintaining a special needs trust. If your heir had the right to access the money or even force the trustee to spend it on certain things, then Medicaid or SSI personnel could rightly count those assets as part of the heir’s estate for the purposes of calculating benefits. Again, that could disrupt those benefits. Since the heir cannot direct how money is spent, however, the assets remain free from eligibility calculations.
How Can a Special Needs Trust be Used to Benefit Heirs?
Before looking at how these trust funds can be used to benefit your heir, let’s first consider what cannot be done with the money. Your trustee cannot simply hand the heir money. That sort of direct gift would have to be reported and could impact eligibility. The trustee cannot allow the heir to direct spending without running afoul of those eligibility provisions.
So, what can be done with the money? A lot, as it turns out. The trustee is permitted to use trust money to pay for an array of things that can benefit your heir. For example:
- The trust can pay for vacations that your heir might otherwise never get to enjoy.
- The trust can buy furniture, pay rent, or purchase other essential items needed for the home.
- The special needs trust can be used to purchase a car for the heir.
- The trust can pay for treatments, rehabilitation, or other non-covered medical expenses.
- The trust can pay for educational endeavors, or the expenses associated with hobbies.
Basically, the trust can pay for most things that are not covered as part of the basic care provided by government programs. That’s where the “supplemental” part of the name comes into play. There is a caveat, of course: payments must be made directly to the vendors, suppliers, or care providers, since the money cannot pass through the heir’s hands without creating complications.
Can You Create a Special Needs Trust on Your Own?
If you search online, chances are that you’ll run across sites that claim that you can make your own special needs trust. And guess what – you can. The odds are, however, that you won’t be happy with the results, and for good reason. The special needs trust is a complex legal entity that must have very specific language if your heir is to enjoy all the protections that it can provide. Even minor language errors could result in complications that might cause your trust to lose the protections you’re hoping to provide.
Can a Special Needs Trusts Attorney Help?
The good news is that a special needs trusts attorney can help to avoid those complications. With the right attorney working on your behalf, you can create the ideal special needs trust to meet your needs and ensure your heir’s future well-being. At Fouts Law Group, LLC, our team understands how vital it is to ensure that the inheritance you leave for your disabled loved one doesn’t end up causing more harm than good. To learn how a special needs trust can provide you with the perfect way to manage your disabled heir’s inheritance, contact us online or give us a call at (404) 596-7520 today.
