Special needs trusts (SNTs) are a specific tool to be used in estate planning when parents have a child with physical, mental or developmental conditions that require persistent care and make it difficult for the child to support themselves. An SNT provides parents with a means to take care of their child after they are gone with the help of a trustee to manage the assets on their son or daughter’s behalf without jeopardizing any governmental benefits they are receiving now or may receive in the future.
If there is one overarching piece of advice across all estate planning, it’s ‘better sooner than later’ and this, too, applies to special needs trusts when they are applicable. But there are some timing considerations to keep in mind specifically with SNTs.
One such factor is the age of the beneficiary. Older parents who had their child young (or have lived to a very advanced age) may need to be aware of the what happens if the beneficiary is 65 years old or older. Any assets placed into the SNT after their child is 65 or older are subject to penalties in line with Medicaid transfer rules. However, any assets in the trust that were added prior to the beneficiary reaching that age are not penalized and are still protected after they reach 65 years of age. Some parents wait until their child reaches 18 or 21 years of age when they are no longer eligible for community programs aimed at students and minors, but it is not legally necessary to wait until this point to establish an SNT.
Another timing factor to consider, is developing a relationship with an estate planning attorney you can trust early on. At Family Estate Planning Law Group, the team is committed to helping you plan for life through thorough, forward-looking, and continual assistance. As we often say, estate planning is not an event, it’s a process. Planning and protecting your estate for your children and other family members involves a lot of different actions, documents, and reassessments as you age, and even more care and attention to life changes when you have a child who has special needs.
As such, the utilization of a special needs trust should come up early in the estate planning process so that available assets can be properly aligned with the trust and the overarching estate plan. It will take time to identify the assets to be placed within a special needs trust and to identify a person or persons to be trustee on the behalf of the beneficiary. As with all your assets, once your SNT is set up, it will be regularly reviewed and realigned with your estate plan as needed. Part of our ongoing client care program entails continual tracking, alignment, and verification of assets consistent with your master estate plan, this process is also key in how we take care of families who have a child with special needs. For example, even if you have a special needs trust, if you do not change your beneficiary designations on your life insurance policies, your IRA’s/401(k)’s and annuities, these assets may go directly to the special needs beneficiaries and DISQUALIFY them from medical and other governmental benefits. This is why ownership and beneficiary designations of current assets and assets you acquire in the future must direct assets to the special needs trust to protect their medical and other governmental benefits. Aligning the assets is oftentimes daunting, time-consuming and frustrating. That is why at Family Estate Planning Law Group we do that work for you as part of our your estate plan. Your child’s needs and your assets may change over time and aligning your estate plan and assets consistent with those changes are included in our process.
Additionally, you want to establish an SNT early to allow time to educate your trustees on their role as steward of the assets being provided to the beneficiary with a disability. There is a lot of responsibility on their shoulders, such as knowing how to disburse assets to the beneficiary without negating government-provided benefits that they receive (such as Medicaid and Supplemental Security Income) and most importantly how best to use a combination of your assets and governmental benefits to make sure your beneficiary is taken care of.
At Family Estate Planning Law Group, we never charge by the hour (yes no hourly billing from the lawyer) as we don’t believe in billable hours, and instead set a flat price so you can contact us when needed and do not have to worry about the “meter running” because we believe in establishing a long-lasting relationship with you and your family so we can truly take care of you and them. Special Needs requires more complex estate planning, something we are very familiar with, and believe our ongoing process fits perfectly. Estate planning, especially special needs planning, should not be approached as a ‘set it and forget it’ because changes could have negative consequences. Your lives, your child’s life, your assets and your estate are dynamic as time moves forward and our philosophy is to be the team you and your family trust and rely on for the duration of your life and beyond. Family Estate Planning Law Group can help with all the elements attendant to a special needs trust and can explain and guide you along the right path to protecting the assets intended for a child with disabilities and who has difficulty supporting themselves while also setting them up with reliable resources for their care after you’re gone.