Estate Planning Tips: Planning For Children with Disabilities

Estate Planning Tips: Planning For Children with Disabilities

Planning ahead as a parent is essential when you have a disabled child. Executing a Special Needs Trust can be one of the many ways a disabled child will be taken care of.


What is a Special Needs Trust?

A parent may create a Special Needs Trust for a child with a disability that is designed to coexist with the eligibility of the government supplemental programs such as Medicaid. The trust may be funded with the assets of the individual who is disabled and must be created for his or her benefit by a parent, a grandparent, or a legal guardian of the individual or a court. Once the trust is created, a trustee will be appointed and will be responsible for maintaining the trust. The trustee has to maintain the trust because it is used to provide care for the disabled individual.

It is important to note the different kinds of special needs trusts. For instance, a self-settled trust is one that is funded with the disabled person’s own assets, such as an inheritance, a personal injury settlement or accumulated wealth. If the disabled beneficiary ever had the legal right to use the money without restriction, the trust is most likely self-settled. Typically, a special needs trust is set up on the disabled’s behalf by a family member or guardian. However, the Special Needs Trust Fairness Act allows individuals who are mentally capable to independently establish their own special needs trusts. This would allow anyone who is not mentally incapacitated to make a trust on their own terms. On the other hand, a third-party trust is established by and funded with assets belonging to someone other than the beneficiary.

Who Qualifies for an SNT?

The Social Security Act states that in order to qualify for a self-settled SNT, one must be under 65 years old at the time and “unable to engage in any substantial gainful activity as a result of his or her disability.” If over 65, federal law will only allow it under a pooled trust.

How to Establish a Special Needs Trust

A special needs trust is essential if your child is dependent on you for financial or caring needs.

It is recommended to obtain an estate planning attorney to prepare the necessary documents when creating a trust in order to ensure a smooth process. Once this special needs trust is appropriately drafted, the terms will prohibit the trustee from using the trust assets to pay for items or services that are not provided by the public benefits system. The special needs trust acts with government public benefits, filling in gaps and providing supplementary care that might otherwise not be accessible.

What to Include in your SNT

The purpose of the trust is to help your designated trustee distribute the fund accordingly.

In your SNT, it is highly advisable to account for possible expenses such as services not provided by Medicaid, internet services, technology, pet care and even vacations. The contents of the trust may only serve the purpose of maintaining a quality of life and may not be used for basic needs such as housing and food that can be provided by the government. Additionally, it can include funds for any tax obligations, transportation expenses, funeral arrangements and more.

The Pros and Cons of a Special Needs Trust

Special needs trusts can help you make sure your child is taken care of in the event that you are no longer around. SNT’s “can keep person eligible for government programs like SSI and Medicaid and help pay for services and care over and above what the government provides.” Additionally, special needs trusts can make sure that your child will not be taken advantage of by securing the funds solely for the purpose of care. Another positive factor of an SNT is that the funds are tax-deductible.

While a Special Needs Trust can have many advantages, one disadvantage is that managing it financially could be a challenge. An SNT can be costly to set up because they often require a minimum, as well high annual fees which one can expect. In addition, SNT’s can limit your control over the trust by giving the trustee all the power to determine whether or not the trust’s terms validate a beneficiary’s request for funds. Lastly, another potential setback to note is that many times when a trust terminates upon one’s death or through another legal manner, the funds get “wiped out” by reimbursing Medicaid, meaning this compensation could burden you financially.

Special needs planning is dire because, without it, you could put your child at risk of losing government benefits. It is never too late to start planning for your child. If you are seeking to establish a special needs trust or require some insight on planning for your child with special needs, seek an attorney who has experience in working with families with special needs. Contact Attorney Inna Fershteyn today for assistance in planning your special needs trust.