Special Needs Estate Planning
What is a Trust?
A Trust is a legal document containing instructions directing the management and distribution of the resources placed in the Trust. The person creating or funding the Trust is the Grantor. The person who receives the benefit or on whose behalf the Trust was created is the Beneficiary. The Grantor appoints a Trustee, which is a person or entity (such as a bank) that will manage the Trust and distribute the Trust’s funds for the benefit of the Beneficiary. Trusts are used for a variety of purposes in estate planning.
The Statute that made the Difference
In 1993, while closing many loopholes that permitted individuals to easily qualify for Medicaid by transferring their property to trusts, Congress created exemptions under the Omnibus Budget and Reconciliation Act for trusts created for the benefit of individuals with disabilities. Located in Title 42 of the United States Code Section 1396p(d)(4), the statutes provide that if a trust meets the U.S. Code requirements, then the trust is not a countable resource for SSI and Medicaid qualification purposes. Neither will a transfer of assets to a d(4)(A) trust give rise to a period of ineligibility for either SSI or Medicaid.
Requirements for a self settled trust that is exempt under 42 U.S.C. Sec. 1396p(d)(4)(A) include:
The self settled trust though established up by a Parent, Grandparent, guardian or the court is funded with the money or resources belonging to the beneficiary.
Do all special needs trusts have the "pay-back-the-State" requirement? NO. Just self settled trusts.
If on the other hand, an uncle sets up a Special Needs Trust with his own funds for the benefit of his nephew who is disabled. That is a third party trust and does not require a pay back clause.
This is just another example of how planning carefully maximizes value.
Why Special Needs Trusts are important
They protect government benefits eligibility - The Special Needs Trust allows an individual with disabilities to have funds available for his or her benefit without the funds counting as a financial asset for benefit eligibility purposes
They protect the opportunity to access superior care and services options - Even where a beneficiary never needs Federal or State public benefits and services (which is very rare, but does happen) consider the special life management needs he or she still has, and use a SNT as part of a comprehensive plan to meet those needs in an organized manner.
Without Special Needs Trusts many individuals with disabilities would be relegated to subsistence living and have access to fewer opportunities and options. They have a typically greater disparity between income potential and the outflow. (expenses) They have higher medical care costs and may need special equipment. Transportation is going to be more expensive, and might need special help with even the most basic tasks. Public benefits are almost always vital for basic needs or as a safety net.
Putting it all together, What is an Supplemental Needs Trust?
A Supplemental Needs Trust is a special kind of trust which holds title to property for the benefit of a child or adult who has a disability. The funds in the Trust can be used to supplement benefits received from various governmental assistance programs including SSI and Medicaid. A special needs trust will manage a variety of resources for the benefit of the injured or disabled person while maintaining the person’s eligibility for public assistance benefits.
Result: Trust assets do not count against the beneficiary's resources or assets.
As an essential component of a comprehensive care plan, the well designed Special Needs Trust (SNT) will, at the same time
Whatever the extent of your resources, preparing and executing a good Special Needs Estate Plan will make more effective use of those resources.
Planning for the future security of a loved one with special needs can seem a daunting task, but it is essential to take action NOW!
The first step is to find a competent attorney and/or financial planner. Special Needs Trusts must comply with complex federal and state laws to be effective, and although your unique input is absolutely necessary, the document should be drafted by your attorney.
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The above information is provided to educate in a general way and is not intended to provide specific legal or professional advice.