Parents who leave life insurance, stocks, bonds, or cash to all children equally may be putting their child with Special Needs in jeopardy. Often individuals with special needs, including physical and cognitive disabilities, are qualified to receive government benefits like Medicaid to help them maintain their health and live more independently. An inheritance would disqualify a person from receiving these benefits, possibly putting them in dire circumstances, explains the article “Take special care with Special Needs trusts” from the Herald Bulletin.
The purpose of a Supplemental Needs Trust (often called a Special Needs Trust) is to protect assets that can be used to supplement the basic benefits covered by Medicaid or other programs. Most of these benefits are means-tested and the rules about outside income are very strict. The value of assets placed in a Special Needs trust does not count against the benefits. However, this area of the law is complex, and requires the help of an experienced elder law estate planning attorney. Getting this wrong can lead to disqualification from benefits, loss of housing, and more.
The trustee manages assets and disperses funds when needed, or at the direction of the trust. Selecting the trustee is extremely important, since the duties of a Special Needs trust could span decades. The person in charge must be familiar with the government programs and benefits and stay up to date with any changes that might impact the decisions of when to release funds.
These are just a few of the considerations for a trustee:
- How should disbursements be made, balancing current needs and future longevity?
- Does the request align with the rules of the trust and the assistance program requirements?
- Will anyone else benefit from the expenditure, family members or the trustee? The trustee has a fiduciary responsibility to protect the beneficiary, first and foremost.
Well-meaning family members who wish to take care of their relative must be made aware of the risk of leaving assets directly to an individual with Special Needs. An experienced elder law estate planning attorney will be able to create a Special Needs trust that will work for the individual and for the family.
Reference: Herald Bulletin (March 13, 2021) “Take special care with Special Needs trusts”