If an individual with special needs depends on you for financial resources, your estate plan should address how that support will continue when you are no longer around. Proper planning helps to ensure that your child with special needs receives financial assistance in the future without hindering his or her eligibility for government assistance programs.
Defining a Special Needs Trust
Also referred to as a “Supplemental Care Trust”, the Special Needs Trust can serve as the primary savings tool for a child’s future. The Special Needs Trust allows for the transfer of savings to your child without jeopardizing his or her ability to receive benefits such as Supplemental Security Income and Medicaid benefits. Simply leaving your assets to your children using a will can make them ineligible for governmental assistance programs because of the value of assets gained. Using the trust, the beneficiary can purchase products and services that they need. This trust also has an additional advantage; friends and family members can make monetary gifts, which further contribute to the financial well-being of your child.
Special Needs Trust Planning
When planning a Special Needs Trust, there are several important factors to consider. Remember to take into account the severity of the disability of the individual, future living requirements, the individual you intend to appoint as their guardian (if the parent is not able to care for them), and other crucial factors.
Setting up a Special Needs Trust
Before setting up a Special Needs Trust, you need to recognize the different types that exist. The two main types are the First-Party Special Needs Trust and the Third-Party Special Needs Trust. The first-party special needs trust, as its name suggests, is set up and funded by the disabled person with their own assets. In the same sense, third-party special needs trust is established and funded by someone else for the benefit of a disabled person, and the assets transferred will not put governmental benefits at risk.
After you decide which type of trust you want to set up, you have to name the beneficiary of the special needs trust, appoint a trustworthy and reliable trustee who will be in charge of the financial management and ensure that your trust is upheld, and designate a conservator or guardian who will care for your child and make important decisions for your child. Then, you have to fund your trust with assets in accordance with the rules of the trust that you decided to set up.
While you can set up a special needs trust yourself by reading guidebooks and online articles, it can get complicated and disorganized. Also, if you run across an issue, or have questions about your situation or which trust is best suited for you, it would be difficult to address without the assistance of an attorney. An estate planning attorney can explain to you the requirements and state-specific rules and then guide you through the process of setting up a trust.
Funding a Special Needs Trust
When funding a Special Needs Trust, the most important thing to remember is that the trust, not your child directly, must be the heir or beneficiary of any funds you or anyone want to transfer to your child. Each state has a different set of limitations on how money in special needs trusts can or cannot be used. Generally however, it can be used for supplemental needs (needs not met by provided government benefits) such as housing costs, living expenses, legal fees, and certain medical procedures.
There is no limit to how much you can include in your special needs trust, and the amount would depend on how much care your child needs. Some ways you can fund your trust include transferring a variety of assets including personal property and bank accounts, and using inheritances, life insurance, lawsuit awards. There are also legal fees such as setting up a trust and managing a trust, so some professionals suggest at least $100,000 to fund a trust.
Do You Need Help Setting up a Special Needs Trust?
If you are looking into setting up a Special Needs Trust, it is wise to select an attorney experienced in working with families of children with special needs, such as top New York Attorney Inna Fershteyn. The attorney’s role is essential – to properly set up and establish the trust, as well as the responsibilities and limitations of the trustee. The most important thing to take away is to not overlook the importance of a Special Needs Trust. Especially where a disabled child is involved, it is of greater importance that funds be available when needed.
It is never too early to start planning for your child’s future. Making the right moves today will ensure your child’s needs will always be met. If you require assistance with your Special Needs Planning, contact NY Supplemental Needs Trust Planning Attorney Inna Fershteyn today.