Planning a Special Needs Trust

Central HS Special Needs Students on a bicycle tripHaving a special needs child presents several challenges to families. One area that is commonly overlooked, when dealing with this type of situation, is a strategic estate plan that takes into account this family member’s particular special needs long after their parents pass away. Estate plans in general are not always as comprehensive and well-thought-out as they should be, but it is especially important to pay careful attention to how your estate plan is structured in the case that involves a special needs child.

Consider the following situation: Jeremy is a special needs child that is a joy to his family and friends. His grandparents have expressed a desire to provide gifts for his care in the event of his parents’ incapacity or death. His parents and grandparents would like to make monetary gifts to a bank or investment account and include him in their wills. However, any gifts or accounts in Jeremy’s name could disqualify him from any government benefits and assistance. So, what should they do?

For a special needs child or adult, you will want to have a Special Needs Trust in place.

You will want this special needs trust set up correctly for two main reasons:

  • To ensure the child is properly taken care of throughout their life, and is not disqualified for government benefits and assistance, once the parents are deceased.
  • To prevent the cost of additional care of the special needs child from being passed on to other family members, in the event that the parents pass away.

In many cases, the special needs trust isn’t activated until both spouses are deceased. At that point, the child’s share of any inheritance would go into a special kind of trust, called the special needs trust. However, a special needs trust can be set up and activated at any time, and can contain assets that anyone can contribute to. Once this type of trust is set up, the special needs child’s share of an inheritance can be received into the trust when either or both parents are deceased. This specific trust allows the special-needs child to receive the benefits of that trust without disqualifying them for any government benefits that they’re receiving.

Normally, government benefits are need-based. In other words, there is always a specific dollar amount or asset level that an individual must remain under in order to qualify. If a special needs person has too much in assets, then they no longer qualify for government benefits until those assets are spent down.

The first problem is that the asset limit is not a very high amount to begin with. For instance, inheriting over $2,000 in assets could disqualify someone from receiving these benefits.

The second problem is that the government benefits they receive don’t cover everything they need. Several things that are beneficial to a special needs individual, but are not absolutely necessary, are not covered by government benefits, such as:

  • Dental, ophthalmic, or auditory care, diagnostic work or other medical treatment for which there are not funds available, including plastic surgery or other “non-essential” medical procedures.
  • Costs for Private rehabilitative training and physical therapy or alternative therapies or services
  • Supplemental nursing care expenses that assistance programs may not cover.
  • Costs for personal attendant care.
  • Companion care expenses.
  • Funds to cover travel costs for the beneficiary’s relatives or friends for visitation, or to accompany them on vacations in the event that the trustee deems such expenditures appropriate and reasonable.
  • Costs for specialized equipment
    • Electric wheelchair
    • Van equipped for handicapped use or other specialized vehicle for transportation.
  • Training and Education Program Costs
  • Social, Recreational, and Entertainment Costs
  • Internet, telephone, and/or cable service.
  • Advocacy and legal services.

So, having a custom special needs trust form drawn up can take up the slack, and pay for the things that government benefits won’t cover.

Counselor And Student WorkingIf you just put the funds you wanted allocated for specific purposes for your special needs child into a normal trust, you still run the risk of disqualifying them for government assistance. A trust that is setup with the standard language of a trust usually provides for the expenses to be dispersed for costs related to health, education, maintenance and support. Setting up their assets in a standard trust will cause those assets to be considered as part of special needs child’s estate, and those assets could end up disqualify them for benefits.

A special needs trust has certain rules and requirements:

  • The beneficiary of the trust can never be the trustee.
  • They never have control of the trust.
  • Somebody else controls the trust and the provisions of the trust say that it provides for the child’s needs only above and beyond what government benefits will pay for.
  • If ever the existence or the interest in the trust by the special needs child would disqualify them for government benefits, then the trustee has the option to not distribute the assets and to terminate the trust in favor of other individuals.

Basically, a special needs trust uses specific legal language to ensure that the child will continue to be covered by government benefits, as well as have access to additional funds and assets. At Romano & Sumner, we set up special needs trusts in Texas for many of our clients. What we are really providing, through our expertise and experience, is peace of mind for the parents.

Any family with a special needs child should contact us or an experienced special needs trust attorney and discuss these issues. A special needs trust doesn’t have to cost a fortune. Taking the time to get your assets in order to ensure that your child is taken care of long after you are gone is well worth your while.

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    Romano & Sumner, PLLC

    Romano & Sumner, PLLC