Special Needs Planning
A Supplemental Needs Trust (also known as a Special Needs Trust) is created to ensure that beneficiaries who have a disability or are incapacitated are cared for by your estate. The trust is set up to administer the benefits and protect the assets of individuals who would not otherwise have the capability of managing an estate themselves due to a disability or who is receiving needs based government benefits.
A Supplemental Needs Trust can be run by family members as a family trust or by trustees appointed by a court. Proper care should be taken in setting up a Supplemental Needs Trust to help maximize the benefits while protecting the needs of the beneficiaries.
If your child has physical, emotional or mental challenges, careful estate planning is crucial. One of the most important reasons to create a proper estate plan is to preserve the child’s eligibility for government benefits and other programs. There are many things that could go wrong and jeopardize eligibility for those benefits. One of those includes beneficiary designations in retirement plans and other accounts. If these funds are left to children with special needs, it can have a dramatic unintended financial impact on those receiving needs-based government benefits. For instance, if the child qualifies for Medicaid and receives aid to help with his daily living and medical needs. If your retirement funds or other accounts pass directly to your child, then receiving those assets may disqualify him or her for Medicaid benefits. In layman’s terms, since only a home, a car used as transportation for medical care, and $2,000 in cash are exempt from Medicaid calculations, inheriting a large sum of money could disqualify your child for Medicaid and disability benefits.
The best way to avoid this situation is to create a Supplemental Needs Trust, and then place or leave the assets intended for that child in the Trust. A Supplemental Needs Trust is designed to supplement benefits received from government programs. Instead of paying for medical care, for example, the trustee can then use those funds for what the child needs and pay for things Medicaid will not pay for. Retirement plans and gifts can then be left directly to the Trust, which could be used for clothing, entertainment, vacations, and other discretionary spending for the child.
Contact our office for help in creating a Supplemental Needs Trust. When properly designed, the Trust can receive retirement funds or other inheritance without creating negative repercussions. Your goal is to help your child with special needs without compromising his or her benefits, so make sure your best intentions are truly realized.