For parents of children with special needs, estate planning involves a special set of challenges. How will a child with a physical or mental disability be taken care of after the parents have died? Importantly, how can the child continue to receive governmental benefits (such as SSI and Medicaid) and still benefit from a gift or inheritance from the parent(s) or from a personal injury settlement?

The answer is called a special needs trust. The assets in that trust can provide a more comfortable standard of living for either a minor or adult child without jeopardizing the receiving of services through governmental benefits. 
Needs not covered by SSI or Medicaid that can be satisfied out of the trust include:

  • Dental expenses
  • Special dietary needs
  • Equipment requirements
  • Insurance
  • Hours of home health care in addition to those covered by Medicaid

Lifestyle-enhancing benefits that a special needs trust can finance include:

  • Education expenses
  • Electronic equipment
  • Vacations
  • Entertainment
  • Gifts for others

Designing a special needs trust isn’t simple, and involves navigating the complex maze of federal and state laws concerning government benefits. In fact, americanbar.orghttp://www.americanbar.org/newsletter/publications cautions attorneys that “even the best special needs trust can cause ineligibility for public benefits if it is improperly administered”.

At Rebecca W. Geyer & Associates, we’ve seen what an enormous positive impact special needs trusts can have in terms of improving a disabled heir’s quality of life. We consider special needs trust planning a particularly gratifying aspect of our work.

There are three basic types of special needs trust:

  1. Stand-alone trust (funded now with property belonging to someone other than the disabled beneficiary) created by parents, grandparents, or a court-appointed legal guardian
  2. Testamentary trust funded when the parent or guardian dies, created through the will.
  3. Self-settled trust created for the disabled individual out of assets he/she has received from an inheritance or personal injury settlement.

Are there limits on the amount of money or assets that can fund a special needs trust? The answer is no. Of course, the funds in the trust must be used exclusively for the benefit of the disabled beneficiary.

There are special rules special needs trusts must follow in order to preserve the disabled person’s right to public benefits, including:

  • The trust must be irrevocable
  • The trustee must have sole and absolute discretion to use the funds for sole benefit of the recipient of public benefits, without being required to make any regular payments of income of principal to the disabled recipient

It’s reassuring to know that the lives of special needs children can be improved with special needs estate planning strategies!  For further information about planning for your special needs child, please contact Geyer & Associates.