Special Needs Trusts

Protect your loved ones. 

Special needs children are indeed special to their families who worry constantly that their needs are not being met or that their quality of life is not as it should be. A special needs child can be someone with autism, Down’s syndrome, muscular dystrophy, or any developmental delay, among others. They are children who need extra help with school or require an adaptive device for learning or daily living activities.

Parents and family members will do nearly anything to see that their child, sibling, or relative receives what most of us take for granted so as to enrich their lives or at least provide some added enjoyment.Most special needs children and adults receive some form of public benefits. However, these benefits can be put at risk if a parent or other family member leaves the child or adult with assets in a will or decides to make cash gifts to them. You can, however, safely leave assets or provide funds to your child now by setting up a Special Needs Trust with the assistance of your attorney.Should you have a child who has special needs, a Special Needs Trust can provide for the child’s supplemental needs if your child is receiving public benefits such as Social Security Disability, Medicare, and other government assistance.

These trusts are geared towards individuals with severe physical or mental disabilities and are set up to avoid jeopardizing their receipt of government benefits.

These trusts can be revocable or irrevocable so long as the beneficiary cannot revoke the trust. If the trust is to be set up during your lifetime and will be funded from multiple sources, an irrevocable trust is advised. If it is not to be funded until you pass away, then making it revocable provides flexibility and enables you to change it at any time before that occurs.

A disabled person may not have more than $2,000 in assets in his or her name to be eligible for SSI and other benefits. If you gift your child significant funds or leave funds or other assets to the child in a will, you risk those benefits being terminated. Assets in a trust, however, are the property of the trust and are not considered when determining the child’s eligibility for SSI or Medicaid. A Special Needs Trust can be self-settled or a third party Special Needs Trust.

A self-settled trust includes funds derived from the beneficiary. The special needs child or beneficiary must be under 65. The trust can be set up only by a parent, grandparent, or legal guardian, or it must be court-ordered. Upon the death of the beneficiary, Medicaid is reimbursed from the trust to match the total medical assistance paid. This type of trust is irrevocable.

A third party Special Needs Trust is funded with assets from a third party, regardless of who the third party is. This type of Trust is typically how parents leave assets to a special needs child.  When you pass away, your funds go directly to the trust without jeopardizing the child’s continuing receipt of public benefits.  

In addition to leaving assets to a Special Needs Trust for a child, parents can name a Special Needs Trust as a life insurance beneficiary.  This is a technique that is often used when special needs children are younger, and parents worry about having enough assets to leave for a child if something should happen to them at a young age before they have had time to set enough money aside to provide for their children.

For a third party Special Needs Trust, there is no age restriction on the beneficiary, and anyone can establish the Trust. There is also no Medicaid payback provision, and the Trust may be revocable or irrevocable.

To set up the Special Needs Trust, you will need certain information:

  • Name of Beneficiary
  • Who you will name as Trustee, and who you will name as a backup Trustee
  • How you will fund the Trust (e.g. at your death through your Will, with a life insurance policy, currently, etc.)
  • Name of beneficiaries to whom remaining funds from the Trust will pass once the special needs beneficiary passes away
  • Relevant personal facts of the beneficiary such as specific needs, personal habits, abilities, and adaptive equipment that is needed that can be in an accompanying memorandum for the benefit of the trustee
There is certain language that should be included in the trust document. It should be clear that none of the trust funds will be used for the child’s basic needs, which includes housing, food, clothing, and medical care since public benefits will usually provide for them. However, trust funds can be provided to purchase a home to be leased to the child beneficiary. The home can also be furnished with funds from the trust, including special or adaptive furniture.   In addition, funds can be used to purchase, among other things:
  • Dental care, physical therapy, massages, support services, and other medical costs not covered by any benefit programs
  • Home care services not covered by another program
  • Telephone expenses
  • Recreational activities such as movies, concert tickets, salon visits, camp participation, and trips
  • Household goods and other personal items, such as computers, cameras, televisions, etc.
Language can be in the trust instrument that directs the trustee to pay for special recreational activities the beneficiary regularly enjoys and to purchase any items that will increase the individual’s enjoyment of life. A Special Needs Trust is a marvelous way of providing for your child and enables him or her to enjoy life more fully without fear of losing basic housing, medical, and other needs – just imagine the smiles and pleasure your child will experience, because of your thoughtful planning, without any fear of losing needed assistance. Get in touch with an estate planning attorney from Schloemer Law Firm to get started on a trust for your loved one. If you want to learn more about estate planning, read our blog post Estate Planning 101.