Special Needs Trusts

Anyone with a special needs child or family member knows the challenges his or her care brings. Whether the loved one has unique medical, physical or psychological needs, the coordination of care — and compensation for that care — adds multiple demands to a primary caregiver’s time and financial resources. Determining how that care will be continued for a lifetime is often an added concern. The solution for many is establishing a special needs trust.

Special needs trusts (also commonly referred to as supplemental needs trusts) provide for the long-term requirements of the disabled while maintaining their eligibility for state or federal programs like Social Security or Medicaid. Because many of these benefits are based on income or assets, they can be lost if the person’s financial worth suddenly looks more robust due to an inheritance or gift. A special needs trust can help you ensure continued eligibility for those basic services while providing for certain quality of life aspects such as specialized education or training, professional services, mobility equipment, living arrangements and recreation.

There are other factors worth considering, too. A special needs child or loved one may not have the skills necessary to manage a gift, inheritance or standard trust on his or her own. Passing on your money and assets to the new caregiver (another child, relative or special family friend, for instance) on behalf of the disabled individual won’t protect the money or assets from the new caregiver’s creditors, doesn’t provide for continuity of care should that caregiver die or become incapacitated, and offers no assurance that the funds will be used solely for the benefit of your loved one.

A special needs trust also makes it easier for other family members, like grandparents, to leave an inheritance to help support the disabled individual. Rather than going directly to the individual, which could make him or her ineligible for government-funded benefits, the gift goes to the trust instead.

Establishing a Special Needs Trust
Special needs trusts most often are funded by life insurance policies naming the trust as beneficiary, or by other types of third-party assets. (They also can be established with the beneficiary’s own assets in some instances, such as if there are damages awarded in a lawsuit.) One or more trustees whom you name will assume responsibility for managing the assets of the trust, in accordance with your written instructions, on behalf of the beneficiary.

Third-party trusts can be established for a disabled beneficiary at any age and customized for the beneficiary’s unique needs and preferences. Any assets left upon the beneficiary’s death can be distributed to others as established in the original trust agreement.

In order to avoid family conflict, ensure continuity of care throughout and beyond the beneficiary’s lifetime, and provide the necessary professional expertise, many families choose to work with a corporate trustee to manage their special needs trust. Either working independently or in partnership with family members or friends who are named co-trustees, a corporate fiduciary can be a vital aspect in providing you with complete peace of mind in handling everything from investing the trust assets and filing tax documents to overseeing payment distributions.

Special needs trusts — although extremely beneficial — can be complicated to properly establish. Be sure to speak with your attorney and trust representative for more information related to your unique circumstances