Special Needs Trust for an Impaired, Disabled, or Incapacitated Child or Adult
Contact Fredrick P. Niemann, Esq., an Attorney with Experience in Special Needs Trusts. Visit www.specialneedstrustnewjersey.com to learn more.
Special Needs Trusts are important documents for the millions of Americans who have disabled family members, whether it be a physical or mental illness. These trusts are designed to hold assets that will eventually be granted to an individual who is receiving public benefits, assisting that person in securing financial interests yet preventing them from being disqualified from receiving their public benefits. A properly drafted special needs trust will assist a disabled individual in continuing to receive Supplemental Security Income (SSI), Social Security Disability (SSD), or any other form of state aid. In addition, if they are in subsidized housing, they will continue to live there.
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THE BENEFITS OF A SPECIAL NEEDS TRUST
A Special Needs Trust is the ideal planning tool if you have a loved one with a disability. It allows assets to be held for the individual without disqualifying them from public benefit eligibility. These trusts are often used to supplement public benefits that an individual receives, paying for products and services that the public benefits do not. The following are some of the major beneficial uses of a Special Needs Trust:
- Allows the disabled individual to keep their income from the public benefits program as well are their health care benefits.
- Uses money in the trust to pay for items and services that are not covered by the public benefits program.
- Uses money from the trust to pay for doctors who do not accept Medicaid or other health insurance.
- Parents control where the assets go before and after the child is deceased.
WHEN SHOULD I CONSIDER SETTING UP A SPECIAL NEEDS TRUST?
If you have a disabled child, such that your child is unable to work and hold a job or is able to only work part-time and in a limited position, you should consider a Special Needs Trust as part of your estate plan.
IS THERE A LIMIT TO THE AMOUNT OF MONEY I CAN PLACE IN THE TRUST?
No. In our practice, we have created trusts that will ultimately hold as little as $30,000 and we have created trusts that hold in excess of $1,000,000.
WILL A SPECIAL NEEDS TRUST REPLACE MY WILL OR ANOTHER TRUST I HAVE SET UP?
No. Your existing will or trust will continue to hold your assets as long as you live. In most cases, the disabled child’s inheritance will be distributed from either your will or existing trust to the Special Needs Trust at the time of your death.
IS MONEY PUT INTO THE SPECIAL NEEDS TRUST WHILE I AM LIVING OR ONLY ONCE I AM DECEASED?
Typically, Special Needs Trusts are funded upon your death. However, if you would like to set it up so that money is placed into the trust while you are alive, it can most certainly be set up that way. The choice is completely up to you. Typically, those who set up Special Needs Trusts which have money placed in them while the person giving the money is alive are grandparents or parents of adult disabled persons. You may also decide whether to gift or transfer money into the trust while you are living. Be advised that this raises a number of tax issues about which it is prudent to obtain appropriate advice.
WHAT WILL THE MONEY IN THE TRUST BE USED FOR?
Money is used generally for items and services that are not provided to the individual by the public benefits program. For example, money from the trust can be used to purchase the individual a television or pay someone to be the person’s companion on a trip or even at home.
WHY SHOULD I USE A SPECIAL NEEDS TRUST? WHY NOT LEAVE THE MONEY TO THE DISABLED CHILD’S SIBLING AND ALLOW THEM TO TAKE CARE OF IT?
Having irrevocable funds devoted to the disabled child is extremely important. While the disabled child’s sibling may always mean well, numerous circumstances could arise throughout their life that could threaten the availability of these funds to the disabled individual. For example, the sibling may get divorced, sued, or die before the disabled sibling. In all of these circumstances the money could be lost since it is not in an irrevocable trust.
WHO SHOULD I APPOINT TO BE THE TRUSTEE OF MY SPECIAL NEEDS TRUST?
The trustee should be someone who is very responsible and who will be devoted to the beneficiary. This is often a relative, although it can be a professional fiduciary or “professional trustee” if no family member is available. This is a very complicated question and many people find it helpful to have a discussion with an attorney who understands these types of trusts.
WHAT HAPPENS TO THE MONEY REMAINING IN THE TRUST IF THE BENEFICIARY DIES?
This is entirely up to you. You can leave the money to whoever you want, whether it be family members or your favorite charity. Each individual trust will dictate who the remaining funds will go to.
DOES THIS MEAN THAT THE GOVERNMENT WILL NOT BE PAID BACK THE MONEY FOR THE CHILD’S MEDICAL CARE?
In most cases, yes, the state will not get their money back when parents establish a trust for a child.
CAN A SPECIAL NEEDS TRUST HELP IF A DISABLED PERSON INHERITS MONEY?
Yes. In the majority of cases, a disabled individual in receipt of public benefits is entitled to shift inherited assets into a Special Needs Trust without disturbing his/her eligibility for the public benefits. In this scenario, the trust is typically established by the disabled individual’s parents or relatives, or even by the courts. The child is not allowed to establish it himself, although his money can go into it. If this scenario takes place, however, the state is entitled to be reimbursed for any benefits that it pays.
If you have a disabled child or a loved one who is receiving or may receive public benefits, a Special Needs Trust may be the right choice for you and can serve as an essential part of your estate plan. Call us today to discuss your needs and/or to set up an appointment. Fredrick P. Niemann, Esq., welcomes all of your inquiries. He can be reached at Toll Free: (888) 800-7442 or by email at fniemann@hnlawfirm.com.