Downs Law Firm, P.C.

Special needs trusts

How Do Special Needs Trusts Work?

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The most common question faced by special needs parents and caregivers is, ‘What will happen if I am not here?’

The question “How Do Special Needs Trusts Work?” is more complicated than you might imagine. First, how such a trust is designed and works depends very much on whose money is being used in the planning. Ideally, the individual does not own property in their own name, as this will often make them ineligible for government needs-based benefits.  We create such trusts in wills and living trusts very frequently, and they work well, allowing the child to receive benefits without owning the trust assets.

Sometimes ownership of the assets is not avoidable, as when the child recovers funds for a personal injury, such as with a car accident or medical malpractice claim. For inheritance, the planning requires what all planning does: focus and commitment.

I once believed that parents of children with Special Needs would have taken time to plan because failing to do so is devastating. After all, these parents and caregivers worry about every day, but it is always on their minds. Despite this worry, 72% of parents and caregivers have not yet named a trustee for their child or have not formally planned for their future care or guardianship. This is something that should be at the top of their to-do lists, says kake.com in the article “Special Needs Trusts are Always Available to those Who Need them.”

A special needs trust is a way to set aside money for a special needs child or individual. In 2016, President Obama signed the 21st Century Cures Act. This new law made a number of changes to existing laws about SNTs. It gave children with special needs and adults the ability to get funding through a trust. The assets are available to them, in addition to any existing government-funded programs they were receiving. With a SNT, the individual can receive their public help and the extra money also. That includes an inheritance or life insurance payment after their parents or caregivers pass away. Able accounts also were created.

There are a number of different types of SNTs, so it’s important to talk with an experienced estate planning lawyer who is familiar with the SNT laws and applicable law in your state.  For instance, in situations where the child already owns the money or will inherit it soon, a different kind of Special Needs Trust is needed. Here’s what you need to know:

The most commonly used SNTs are called “self-settled” trusts and “pooled” trusts.

For a self-settled trust, the individual is allowed to create the trust by themselves, from their own money. If the individual is a minor, a parent or guardian must establish the trust and determine when the individual may take funds from it. Those who are not minors may create this type of trust without the approval of the court.

A pooled trust is typically created when the individual is older than 65 and establishes the trust on their own.

A trustee must be named for the trust. This should be someone in whom the parents have great faith and confidence.

The biggest benefit for parents or caregivers is the peace of mind of knowing that the disabled individual will have access to additional funds and beneficial programs if they need them. Speak with an estate planning or elder law attorney who can help create the type of trust appropriate for your situation.

Reference: kake.com (Nov. 16, 2019) “Special Needs Trusts are Always Available to those Who Need them”