If you’ve done some reading on our blog already or have done your homework before reading this, you may already have a solid grasp on the benefits of comprehensive and quality estate planning. And at Family Estate Planning Law Group, we work to make sure each estate plan is customized to fit any given family’s needs. Sometimes, that involves specific types of trusts that fulfill certain functions.
For example, what if you or someone in your family has a dependent who needs persistent attention because of a physical, intellectual, or mental disability and they receive government assistance for income, health care, or housing? In that case, there needs to be a different legal mechanism to protect that assistance while also allowing them to receive estate assets. This takes the form of a special needs trust (SNT).
Parents of a child with special physical or developmental needs know that many of the simple, everyday functions we take for granted are more complicated for their children and come with associated costs to help them with their standard of living. This can be compounded by the child being unable to manage their own funds because of their condition.
A special needs trust can help parents have peace of mind that their child will be able to continue their lives comfortably after they are gone. But, like every other aspect of estate planning, it’s essential that it’s structured properly to not interfere with the other benefits they receive.
At Family Estate Planning Law Group, we most commonly use what are called third-party SNTs. Importantly, the assets contained in a third-party special needs trust do not directly count against a person’s eligibility for assistance such as Supplemental Security Income (SSI) or Section 8 housing. The key to any special needs planning however, is to make sure that the assets intended for the special needs beneficiaries are aligned with the trust. The trust alone is not sufficient. Assets need to be retitled and beneficiaries need to be changed so that upon death the assets are owned by the special needs trust. We have seen many instances where a special needs trust is created but a beneficiary designation on a life insurance policy or IRA names the special needs child individually and does not name the trust. This will result in the child losing their governmental benefits. All assets must be placed in the SNT and disbursed upon the passing of the trustor (the person who created the trust). A great way to protect the special needs child is to create a standalone trust—that is, one that is not dependent on a superseding living trust to be executed—so that other family members like grandparents and uncles and aunts will also be able to contribute assets in addition to those of the parents.
When creating a third-party SNT, parents assign trustees to manage it—be they family members or other trusted individuals—who can help the beneficiary ( your child) with managing and utilizing the assets therein. It’s important for those trustees to understand how distributions from the SNT to your child could affect their eligibility to receive government aid for their well-being and care.
Trustees should become familiar with how best to handle common expenses with SNT funds, and that’s part of what we cover in our Family Care MeetingTM at Family Estate Planning Law Group. During this meeting we bring in your team: the professionals you work with (like a financial planner), your trustees, and any family members you deem appropriate to be there. With these meetings, Family Estate Planning Law Group educates everyone in attendance on your estate plan—without disclosing any assets or numbers unless you ask specifically to do so—to ensure everyone is on the same page and knows their role in your estate. Anyone can ask questions so that the roles and plan structure are clearly understood. At the same time, they help everyone involved get to know us here at Family Estate Planning Law Group, so they feel comfortable with us moving forward. Our Family Care MeetingTM is especially important in special needs trust planning since an SNT trustee’s role is significantly more complex.
This Family Care MeetingTM is included in our ongoing client care program, along with many other great benefits at no extra cost. Our ongoing client care program means our team becomes part of your team and we are available for questions, in-person meetings, and to provide any other support you may need as well as ensuring your estate plan remains up to date.
Special needs trusts require plenty of detail, from instructions for trustees to help guide the administration of the trust after the parents’ death to what assets are intended to be placed in the trust and when. But the key is to know that a special needs trust protects a child who has difficulty taking care of themselves from people who may otherwise try to take advantage of them and through ensuring that they will have the assets to live comfortably without disrupting the assistance they already receive. This underscores the important of setting one up well ahead of time to make sure these protections are in place no matter what may happen.
To learn more about special needs planning, our Family Care MeetingTM, or other estate planning topics, visit our website and explore our blog. Ready to establish an estate plan and plan for life with our team? Schedule your complimentary consultation today!