Estate Planning Options When You Have a Loved One with Special Needs

An estate plan can contain many documents, depending on your needs. When you have a child or another close family member with special needs, you may need to add some unique documents to your estate plan. These documents may be necessary to ensure that you can ensure financial care for your loved one in the future without jeopardizing their eligibility for public benefits. An estate planning lawyer at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. can assess your circumstances, discuss your options, and help you determine the best strategy to achieve your goals.

Understanding the Special Needs Trust

A special needs trust is any trust designed to benefit an individual with a physical or mental disability but who also needs to remain eligible for certain need-based government benefits programs. Since there are significant restrictions on how beneficiaries may use distributions from these trusts, beneficiaries can generally remain eligible for these much-needed government benefits.

For example, a single person may only own $2,000 in non-exempt assets to remain eligible for both Medicaid and Supplemental Security Income (SSI) benefits, which are common government benefits that a person with special needs may receive. However, the funds in a properly drafted special needs trust do not count toward that asset limit. The income from the trust can be used to supplement the individual’s basic needs, although it cannot supplant or duplicate the needs that Medicaid or SSI provide. Therefore, while the funds may not go toward the person’s food, housing, or medical care, the funds could go toward recreational activities, clothing, toiletries, and housekeeping services.

The trustee of the special needs trust is responsible for administering a special needs trust on a discretionary basis and ensuring that the distributions are spent only on allowance expenses. In this manner, the trustee safeguards the beneficiary’s eligibility for public benefits.  In many cases, due to the fiduciary obligations and unique nature of the special needs trust, a professional trustee is the most appropriate choice for a trustee.

Types of Special Needs Trusts

Two different types of special needs trusts exist – third-party trusts that a beneficiary’s family member creates and self-settled trusts that a person creates for their own benefit.

Third-Party Special Needs Trust

A third-party special needs trust is the typical type of trust involved in an estate plan. A parent or grandparent of an individual with special needs often creates the third-party special needs trust as part of their overall estate plan. Instead of leaving an inheritance directly to the person with disabilities, which could endanger their eligibility for public benefits, they leave an inheritance to a special needs trust for the person’s benefit. The third-party special needs trust may be testamentary, or one funded solely upon the death of the grantor, or established and funded by the grantor during his or her lifetime.

Self-Settled Special Needs Trust

A self-settled special needs trust is less common and is established by a person with disabilities. This type of trust often becomes necessary when the person has suddenly received a significant amount of assets. For example, suppose the person is involved in an accident or is a victim of medical malpractice and receives a settlement from a lawsuit. In that case, the lawsuit’s proceeds typically disqualify the person from government benefits. By placing the settlement proceeds in a self-settled special needs trust, the beneficiary can avoid losing eligibility for these important benefits.

Three major elements distinguish self-settled special needs trusts, other than the fact that it is the beneficiary who establishes the trust. First, these trusts must be irrevocable and can never be amended or terminated. Second, only persons with disabilities under the age of 65 can create a self-settled special needs trust, while anyone can establish a third-party special needs trust. Finally, a self-settled special needs trust must contain a “payback” provision. Any assets remaining in the trust at the time of the beneficiary’s death must go to the state to repay it for the Medicaid benefits the beneficiary received during their lifetime.

Contact Our Office Today for All Your Estate Planning Needs

At Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A., an estate planning attorney can provide you with a full range of estate planning services, including special needs trusts and other accommodations for loved ones with special needs. In addition, if you lose a loved one, we are here to assist you with all estate and probated-related needs.

We can guide your family through the complicated legal landscape of estate planning law as quickly and efficiently as possible. Call us at (954) 966-2112 or learn more about the legal services we can offer you online. Schedule an appointment to talk to us about your legal needs right away.

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