1024 eWall Street
Suite 100
Mt. Pleasant, SC 29464
ph: 843.416.1102
acf
Special Needs Legal Planning is unlike the traditional legal and financial planning where you buy a home, raise your children, plan four years of college education and retirement. Special Needs Legal is planning for two generations. Many adult children with a disability must be supported and protected their entire lives, even long after their parents have died.
As parents of children with special needs and disabilities understand all too well, one of the biggest worries is what will become of your son or daughter after you are gone and no longer here to care for them. Will their quality of life continue or will it suffer? How can you provide the money for the things that they want and need without disqualifying them from receiving government supports?
Here at the Low Country Law Office on Aging, Mental Health and Disabilities, LLC, we are dedicated to assisting families in establishing plans which will provide their family members with a disability with a decent quality of life for their entire lifetime while at the same time, preserving their entitlement to government support programs.
Statistics: Special Needs and Reasons for Legal Planning:
Nearly 54 Million Americans cope with special needs and the rising associated expenses, according to the National Organization on Disability (2007).
Special Needs Trusts:
What is a Special Needs Trust?
A Special Needs Trust ("SNT")is a special kind of trust which holds title to property for the benefit of a child or adult who has a disability. The Special Needs Trust can be used to provide for the needs of a disabled person supplement ing benefits received from various governmental assistance programs including SSI. A trust can hold cash, personal property, real property, or life insurance proceeds.
Special needs refers to the requisite s for maintaining the comfort and happiness of a disabled person when such requisites are not being provided by any public or private agency. Special needs can include medical and dental expenses, annual independent check-ups, equipment, programs of training, education, treatment, and rehabilitation, eye glasses, transportation (including vehicle purchase), maintenance, insurance (including payment of premiums of insurance on the life of the beneficiary), and essential dietary needs. Special Needs Trusts may also include spending money, electronic equipment such as radios, CD players, television sets, and computer equipment, camping, vacations, athletic contests, movies, trips, money to purchase appropriate gifts for relatives and friends, payments for a companion, and other items to enhance self-esteem.
In 1975 the Social Security Administration established rules allowing assets to be held in trust for a recipient of SSI as long as the disabled beneficiary cannot control the amount , frequency of trust distributions or revoke the trust to use the trust assets for his or her personal benefit. The Social Security Administration's handbook Understanding SSI states: "A trust can be set up for an SSI beneficiary."
Parents (or other family members) of a disabled child can establish a Special Needs Trust as part of their general estate plan. The parents can "pour-over" that child's share of their estate into this special trust and not worry that their child will be prevented from receiving benefits as a result of this income influx due to the inheritance.
A disabled person who expects an inheritance or other large sum of money may establish a Special Needs Trust. Direct receipt of these funds might otherwise disqualify them from public benefits. In some situations, a trust can also be established after the disabled person has received an extraordinary amount of money (though a court order may be necessary).
The manager of a trust is called a "trustee." It can be any person over eighteen years of age -- a parent or loved one, a bank, a financial planner, CPA , or a professional fiduciary. The trustee holds, administers, and distributes all property allocated to the trust for the disabled person during the beneficiary's lifetime.
In most circumstances, when a Special Needs Trust is established by parents for the benefit of a disabled child, those parents serve as the trustee until they die or become incapacitated. When that event occurs, a successor selected in advance by the parents or person establishing the trust continues to serve according to instructions contained in the trust. The successor trustee is usually a family member or close family friend. While this is common for most special needs trusts, we highly recommend using a corporate co-trustee such as a bank or an institutional administrator such as a trust company. The reason for this is to help your family members or loved ones make the right decisions along the way. The corporate trustee can help guide your family members in their decisionmaking as the laws change and new forms or new tax laws take effect which might impact the special needs trust (and your trustees). In addition, the trust is required to file tax forms every year.
No. The whole premise of a Special Needs Trust is that the disabled beneficiary shall not have access to principal or income of the trust. The assets of the trust are for the benefit of the disabled person. However, the disabled person has no power or authority to direct the payment of funds.
Any kind of asset may be held by the trust. Holding title by the trust is a simple process of putting the title to that asset in the trust's name. Many times a trust has no assets put into it until the death of the settlor. The Special Needs Trust in that case is an empty shell waiting for a future event. It is prudent to place some assets into the trust and begin using the trust immediately, but it is not required.
Yes. Additional property may be added to the trust at any time by the settlor or any other person. Additions may be made by gifts during life, by will or living trust, as well as disbursements from life insurance policies, employee plan benefits, or retirement plan benefits.
Yes. If the settlor desires, the trust can remain confidential to all persons.
Having a Special Needs Trust protects your child(ren) from losing government benefits to which s/he may be entitled. Laws change frequently -- therefore SNTs have become a staple in estate planning for any family with a disabled child(ren). Establishing a special needs trust is one of the best strategies in providing financial security for persons with a disability and/or victims of personal injury. A well-drafted SNT makes it possible to set aside funds - such as a gift, inheritance, or a legal settlement - for a disabled or injured person without jeopardizing that person's current or future government (federal and state) benefits.
By prohibiting such funds from being used to pay for food, clothing, and shelter - necessities usually covered by government assistance - these funds can be used to supplement government benefits, not replace them. Since the special needs trustee is given sole and absolute discretion over the management and distribution of the funds, these funds can be used to pay for items designed to enhance the quality of life of the beneficiary -- wheelchairs, handicap-accessible vans, mechanical beds and personal attendants, as well as recreational and cultural experiences.
Parents should consider setting up a Special Needs Trust when they are young. Since most SNTs are funded with life insurance, the younger and healthier you are, the less expensive it is to fund the trust. However, some families or single parents can not afford to budget for life insurance and special needs planning until later in life. Planning later in life poses several problems:
Some families begin their future planning activities with the preparation of a simple will. If their child with a disability will likely have long-term medical or support needs, the SNT can be a vehicle to supply the funding to provide a lifetime of quality care. Even if the future prognosis of your child is unclear, it is never too early to put plans in place for contingencies to care for your family or child in the event of a parent's sudden death or disability.
While many parents of a child(ren) with special needs have done some basic estate planning, few have done very comprehensive special needs planning. Some parents have wills, living trusts, and some even have special needs trusts. Legal documents alone will not guarantee that the money will be there, or that there will be enough of it to meet the long-term care needs of the child with special needs.
A simple will is better than no will at all. A will is not the solution in most special needs planning situations. A living trust is not enough. A special needs trust, even if correctly drafted, is not enough if not coordinated and integrated with other legal documents or with all the financial assets.
Parents never want their child(ren) to be a financial burden on a sibling/ guardian or caretaker. A well-designed estate plan, when coordinated with a properly funded special needs trust, can help parents plan for the financial future of their child(ren) with special needs. If structured by knowledgeable special needs professionals, assets can pass to a special needs trust and not count towards the $2,000 SSI limits for an individual, which means that government benefit eligibility will be maintained and money can be used to supplement the lifestyle of the individual with special needs. The trustee must make certain that the money is used for supplemental purposes only. An important part of special needs planning is to guarantee that a mechanism is set up to provide "enough" money to meet long-term needs. Because the responsibility of the successor trustee is quite complicated we always recommend that parents choose a personal trustee (such as a family member or a close relative) to serve as a co-trustee with a corporate trustee (such as a bank or a trust company) that specializes in handling these types of trust. The laws change annually in some cases and the tax and ineligibility laws must be monitored to prevent unintended complications from arising within the trust and its administration. That being said, it would be extremely difficult for a non-professional to keep abreast of the myriad changes in these laws. Once the trust is funded, the guardian should seek the professional's guidance in handling the responsibilities involved.
When choosing a corporate trustee you should give the successor trustee (a family member or close family friend) the ability to replace the corporate trustee (or bank/ money manager) if their performance is unsatisfactory or contrary to the beneficiary's best interest.
Let's review some of the different ways to fund a special needs trust:
Due to the complexity of federal and state laws, we highly recommend the use of specially trained professionals to assist you in preparing a life plan for your child(ren) with special needs.
The primary advantage that a special needs trust offers over a direct gift or inheritance is that, if arranged properly, the assets in the trust do not actually belong to the beneficiary. In this way, the trust can provide benefits to an individual but not cause the disabled individual to be disqualified from government programs. A special needs trust holds title to property for the benefit of a child or adult who has a disability. The special needs trust can be used to provide for the needs of a person with a disability and to supplement benefits received from various governmental assistance programs.
Special needs trusts typically provide for:
Special needs trusts also may allow a trustee to give the beneficiary money for:
A trust can hold cash, stocks, personal property, and real property. It can own and/or be the beneficiary of life insurance. Special needs trusts also can be used to protect personal injury settlements or judgments from jeopardizing government benefit eligibility. Most importantly, special needs trusts can help parents coordinate their estate plans and provide peace of mind that their child will be provided for.
1. What is my vision of the legacy which I wish to leave my child (or other family member) with special needs? |
2. Have I established proper SNTs, Wills & Trusts that transform my clear vision into an absolute future reality? |
3. Does my Trustee, Personal Representative or Guardian have a Letter of Intent which outlines my wishes for the future care of this person? |
4. Will this Letter of Intent be passed to others who may eventually care for my child, should s/he out-live my second caregiver? |
5. Is the Trust endowed with enough money to assure that distributions will not consume their principal throughout the beneficiary's lifetime? |
6. Have I insured that caregiving survivors are financially protected from the future expenses in the care of my loved one with special needs?
7. Have I talked to my parents and/or in-laws about having their wills reviewed to make sure that their estate plans don't undermine all of my hardwork and planning? |
Copyright 2010 Lowcountry Law Office on Aging, Mental Health & Disabilities, LLC. All rights reserved.
1024 eWall Street
Suite 100
Mt. Pleasant, SC 29464
ph: 843.416.1102
acf