Estate planning for caregivers of an individual with disabilities involves planning for the individual’s long-term living arrangements, personal care and anticipated needs. One way to ensure all of these needs are met while preserving the individual’s qualification for governmental programs is by establishing a Special Needs Trust.
So, what exactly is a Special Needs Trust? What does it do?
A special needs trust is a trust for a person with disabilities designed to preserve public benefits eligibility. It can hold cash, personal property, real estate or can be the beneficiary of life insurance policies.
Is a Special Needs Trust really necessary?
Yes. Typically speaking, the receipt of a settlement, inheritance or gift causes the person with disabilities to be disqualified from their public benefits. Without a trust, anything awarded to the person with disabilities would have to be spent to provide the same necessities that the public benefits were providing. It would not be until after these funds are gone that the individual would qualify for public benefits. By placing those funds in a special needs trust, the individual will continue to qualify for public benefits while still being provided for.
While there are limitations for how the trust can be spent, typically, the trust can pay for clothing, educational purposes, recreational equipment, prepared funeral services, medical treatment and devices not covered by public benefit programs. These supplemental needs are different than the basic needs of food and shelter.
How am I involved in this process?
As a trustee, you will need to be well-educated on special needs trusts. It will be critical for you to speak with others who may wish to leave the beneficiary assets so those gifts can be established to the special needs trust, not directly to the beneficiary. It is also imperative to have an alternate trustee/s assigned in the event the first appointed trustee is unable to fulfill the duties.