Parents with children who have special needs know they play a pivotal role in their child’s medical, social, emotional and mental health. They also face the challenges of figuring out government assistance programs like Medicaid and how these and other programs provide much-needed help throughout a child’s life. Another important way that parents of children with special needs help is with the creation of a special needs trust, as explained in the article “Special Needs Trust (SNT): What It Is and How It Works” from Forbes.
A special needs trust is used to hold assets in an account to be used to support an individual with special needs. The funds belong to the trust and not the individual, so they are not factored into their eligibility for government benefits programs like SSI or SSDI.
SNTs are typically set up by a parent, grandparent, or guardian. The person who sets up the account, called the “grantor,” funds the account, as may any other individuals who wish to provide for the child.
The grantor names a trustee, or a third party, who administers the trust. The trustee is a fiduciary and must act in the best interest of the beneficiary. Funds are to be distributed in accordance with the directions in the trust. The trustee will be responsible for distributing funds, following government benefit rules and requirements, and managing tax obligations, among other things.
Parents are often the trustees, although others, like siblings or close relatives, may also be trustees. Parents who are both grantor and trustee generally name a successor trustee to take over after they die, become incapacitated or resign from their role. Read our article on Four Questions to Help You Choose the Right Professional Trustee for Your Special Needs Trust
A person who may not be able to support themselves due to a medical condition or a disability can gain financial security from an SNT.
Someone with special needs is likely to rely on means-tested government benefits, like Supplemental Security Income (SSI) or Medicaid. These benefits are only available to people with limited income or assets. Anyone receiving SSI, for example, may not have more than $2,000 of countable resources.
A parent who wishes to provide support after they die must plan in advance, so their bequest does not result in the person losing their benefits. This could happen if money is left through anything except a special needs trust. Trusts provide the navigation tools to ensure that the goals of the family get accomplished in a way that is not possible with a traditional will. Trusts allow the grantor to manage assets during their lifetime and even long after their death. Some trusts can provide asset protection while others provide protection of vulnerable or irresponsible beneficiaries from themselves or outsiders.
An estate planning attorney who specializes in special needs planning will know how to structure the parent’s estate plan to protect the individual with special needs and their government benefits.
Assets in an SNT can be used for a wide variety of expenses, including out-of-pocket medical or dental expenses, personal care givers, rehab services, education, vacations, and other permissible uses.
There is a lot of complexity involved with creating a special needs trust. For one, there are several different kinds of SNTs. You’ll want to select the one best suited for your family. Laws about means-tested benefits vary across states, so you’ll need to work with an estate planning attorney familiar with the laws of your state.
A well-drafted estate plan, incorporating a special needs trust, will provide your loved one with the resources to maintain as much normalcy as possible as they adjust to life without their parents. If you have a special needs loved one living in Massachusetts, our Framingham team at Special Needs Law Group of Massachusetts, P.C. can help your family design a comprehensive plan that includes a special needs trust. Contact us if you would are ready to get started planning or check out the Special Needs Estate Planning Masterclass by Attorney Annette M. Hines that offers an overview of how families with disabilities can start the process of mapping out their wishes and exploring how to best protect their special needs loved one with a special needs trust.