What is a Special Needs Trust?
A conundrum for many Americans, especially with the growing aging population, is their estate plan.
Yet, families that have a special needs member have their own puzzle to manage, which involves planning that is unlike others'.
Particularly, a special needs loved one poses a unique challenge of "how to provide" in the event no one is left, usually close family, to care for said individual.
The Problem: Typically, special needs Americans are receiving government entitlement program benefits such as SSI or SSDI.
One of the issues family-caregivers face is leaving assets or a "financial support structure" for their loved one while at the same time avoiding loss, or ineligibility, of the entitlement.
Life insurance is one of the common funding mechanisms for the care-plan.
For those unaware, however, SSI, Medicaid, and SSDI have strict guidelines surrounding recipients' assets and income, even if it is inherited - in light of this, such programs fall grossly short of being able to fund many of the "quality of life" expenditures the special needs person deserves: simple luxuries like televisions, cell phones, vacations, or health expenses such as dentist care.
The Solution: The special needs person need not resign the notion of having funds set aside for their "quality of life.
" But, their caregivers planning should not be 'pigeonholed' into the "prototypical estate plan" that may apply to many of those without a special needs family member; this is not to suggest there is a "one-size-fits-all" plan for anyone, as each family invariably has its own specific needs and goals.
Nevertheless, planning considerations for those with special needs takes on a dimension of its own requiring attention to (1) the goals for care following the point in time when care is not possible as with incapacity or death, and (2) designing a plan that fits within the narrow regulations and guidelines that the federal and state entitlement programs mandate regarding a recipient's finances.
Fortunately, programs such as SSI and Medicaid contemplate the limits on the funds they deliver therefore recognizing special needs individuals' right to "quality of life" as well as their families' desire to reserve money to this end.
Special needs planning, consequently, involves balancing the needs of the individual and the family with the government's entitlement policies.
Therefore, a will and/or life insurance policy is simply not enough.
A planning instrument referred to as either a Special Needs Trust (SNT), or Supplement Trust, is needed.
Such a trust can be created using a will by way of a testamentary (upon death) SNT or the trust can be made independently, which is often the preferred method because of probate.
The testamentary SNT would still need to go through the probate process causing a delay, whereas the stand-alone SNT avoids probate altogether.
In either event, the SNT and/or Supplemental Trust circumvents the income and asset restrictions by maintaining ownership and control over the funds and assets.
A "maintenance provision" therein gives the trustee authority to make only those distributions that do not violate "quality of life" expenditures recognized as permissible by Federal and/or State administrative agencies.
The upshot for the special needs family members is a reserve of funds for a better life while keeping important entitlement benefits.
Before setting up a life insurance policy or transfer of any assets whatsoever through a will or other estate planning instrument, if the beneficiary is a special needs individual it is strongly recommended by this author and others to seek the help of a qualified attorney or estate planner.
Yet, families that have a special needs member have their own puzzle to manage, which involves planning that is unlike others'.
Particularly, a special needs loved one poses a unique challenge of "how to provide" in the event no one is left, usually close family, to care for said individual.
The Problem: Typically, special needs Americans are receiving government entitlement program benefits such as SSI or SSDI.
One of the issues family-caregivers face is leaving assets or a "financial support structure" for their loved one while at the same time avoiding loss, or ineligibility, of the entitlement.
Life insurance is one of the common funding mechanisms for the care-plan.
For those unaware, however, SSI, Medicaid, and SSDI have strict guidelines surrounding recipients' assets and income, even if it is inherited - in light of this, such programs fall grossly short of being able to fund many of the "quality of life" expenditures the special needs person deserves: simple luxuries like televisions, cell phones, vacations, or health expenses such as dentist care.
The Solution: The special needs person need not resign the notion of having funds set aside for their "quality of life.
" But, their caregivers planning should not be 'pigeonholed' into the "prototypical estate plan" that may apply to many of those without a special needs family member; this is not to suggest there is a "one-size-fits-all" plan for anyone, as each family invariably has its own specific needs and goals.
Nevertheless, planning considerations for those with special needs takes on a dimension of its own requiring attention to (1) the goals for care following the point in time when care is not possible as with incapacity or death, and (2) designing a plan that fits within the narrow regulations and guidelines that the federal and state entitlement programs mandate regarding a recipient's finances.
Fortunately, programs such as SSI and Medicaid contemplate the limits on the funds they deliver therefore recognizing special needs individuals' right to "quality of life" as well as their families' desire to reserve money to this end.
Special needs planning, consequently, involves balancing the needs of the individual and the family with the government's entitlement policies.
Therefore, a will and/or life insurance policy is simply not enough.
A planning instrument referred to as either a Special Needs Trust (SNT), or Supplement Trust, is needed.
Such a trust can be created using a will by way of a testamentary (upon death) SNT or the trust can be made independently, which is often the preferred method because of probate.
The testamentary SNT would still need to go through the probate process causing a delay, whereas the stand-alone SNT avoids probate altogether.
In either event, the SNT and/or Supplemental Trust circumvents the income and asset restrictions by maintaining ownership and control over the funds and assets.
A "maintenance provision" therein gives the trustee authority to make only those distributions that do not violate "quality of life" expenditures recognized as permissible by Federal and/or State administrative agencies.
The upshot for the special needs family members is a reserve of funds for a better life while keeping important entitlement benefits.
Before setting up a life insurance policy or transfer of any assets whatsoever through a will or other estate planning instrument, if the beneficiary is a special needs individual it is strongly recommended by this author and others to seek the help of a qualified attorney or estate planner.
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