Special Needs Trusts and Estate Plans

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Category: Special Needs Trust

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The 7 most important reasons to have a will

The 7 most important reasons to have a will

More than half of Americans don’t have a will. This is a list of seven of the reasons to create one.

Having a will is a must! Not having a will could lead to problems when you’re gone. Your loved ones may be left wondering about what to do with your belongings or money. People who don’t have a will often end up getting into disputes over inheritance. A will ensures that your wishes are followed after you pass away.

The Reasons To Have A Will

1. Save time, money, and stress for your loved ones.

Almost all states have a legal process called probate court that oversees the distribution of assets. However, if you don’t own a will, the court system — which is called intestate administration — can become especially complicated. If there is no will, the court has no choice but to appoint someone to administer your estate. And this can be difficult, expensive, and even controversial for your family members.

One of the top reasons to have a will is to streamline this court process. When you have a will, you can choose the person you want to handle your estate, making it easier for your loved ones.

2. Determine who will manage your estate.

As mentioned above, deciding who will handle your estate is a great reason to have a will. When you write a will, you become a “testator” and have the opportunity to nominate an “executor” or in many states is referred to as a “personal representative.” This is the person who will be in charge of wrapping up all your affairs.

Being an executor is an important job. They may be responsible for everything from closing bank accounts and liquidating assets to managing cash flow. You should choose someone who is competent and who you trust to perform these tasks. If you don’t choose an executor in advance, the court will appoint one for you, and it might not be the person you’d want.

3. Decide who gets your assets and property — and who does not.

A will lets you decide who gets your property after you die. You can name people as beneficiaries of specific assets. You can also name beneficiaries for any property that you didn’t list – the “residuary” of your estate. Your executor will handle your estate after you die. They’ll distribute your assets among your beneficiaries.

You might not know that you can also use your will to help ensure that certain people don’t receive anything.

4. Choose who will take care of your minor children.

You can use your will to name guardians for your minor children.## Inputs If one parent dies, the surviving parent will usually get full legal custody. But if both parents die, this is one of several reasons why having a will is so important.

A guardian will be in charge of all your children’s daily needs, including food and shelter. If you don’t nominate a guardian in your Will, a Court will have to choose one. This might mean that someone you wouldn’t have chosen will raise your children.

5. Lower the potential for family disputes.

If you have complicated familial dynamics, there’re good reasons to have a will. If you don’t have a will, your family members will have to guess at your final wishes. And chances are, they won’t always agree. This ambiguity can create conflict, and even fights, that last for a lifetime. Creating a will eliminates the need for guessing.

6. If you have a child with special needs you can provide them with a comfortable future.

If you have a child with special needs it is especially important that you provide for them in a way that will leave them your assets and still allow them to collect government benefits. You can do this by leaving your assets to a trust for the child and not directly to the child themselves.

7. It’s easy to make a will and gain peace of mind.

Some people don’t create or update their wills because they assume their loved ones will automatically inherit everything. But this isn’t always true. Probate can be an expensive and lengthy process for your heirs. And, a will only addresses your current circumstances. You should update it over time as your needs and the people in your life change.

You can leave instructions for your loved ones and provide them with a clear path to follow after you die. It gives many people peace of ­mind, making it one of the top reasons for having a will.

It’s easier than it has ever been to make a will. Unless you have a very large estate, complex family dynamics, or feel that you need expert legal advice, you don’t need a lawyer to draft your will. With SpecialNeedsTrustsOnline.com,  you can create your own will for free, using our simple, online self-help tools.

Special Needs Trusts Online Can Help!

I am a Special Needs Trust Attorney and I am here to help. I am the founder of a nonprofit 501(c)(3) corporation that provides quality information about resources available to families as well as providing affordable Special Needs Trusts and estate planning for families. I have over 20 years of experience helping families just like yours. Find out more information at SpecialNeedsTrustsOnline.com or click here to set up a free appointment.

Source: specialneedstrustsonline.com

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How A Special Needs Trust Works

What Is a Special Needs Trust?

A special needs trust is a legal arrangement and fiduciary relationship that allows a physically or mentally disabled or chronically ill person to receive income without reducing their eligibility for the public assistance disability benefits provided by Social Security, Supplemental Security Income, Medicare or Medicaid. In a fiduciary relationship, a person or entity acts on behalf of another person or people to manage assets.

A special needs trust is a popular strategy for those who want to help someone in need without taking the risk that the person will lose their eligibility for programs that require their income or assets to remain below a certain limit.

Source: investopedia.com

Key Takeaways

A special needs trust is a legal arrangement that lets a physically or mentally ill person, or someone chronically disabled, have access to funding without potentially losing the benefits provided by public assistance programs.

This trust allows for the additional financial support of an individual with special needs, without risking bumping them out of contention for disability benefits.

Public assistance programs set up for people with special needs are predicated on certain income and asset restrictions; money put in the trust doesn’t count toward the purpose of qualifying for public assistance.

Source: investopedia.com

How a Special Needs Trust Works

A special needs trust covers the percentage of a person’s financial needs that are not covered by public assistance payments. The assets held in the trust do not count for the purposes of qualifying for public assistance, as long as they are not used for certain food or shelter expenditures. Proceeds from this type of trust are commonly used for medical expenses, payments for caretakers, transportation costs, and other permitted expenses.

The party who creates the trust will designate a trustee who will have control over the trust. This trustee will also oversee its management and the disbursement of funds. Assets originally belonging to the disabled individual that get placed into the trust may be subject to Medicaid’s repayment rules, but assets provided by third parties such as parents are not. This type of trust is sometimes also called a “supplemental needs trust.”

Special needs trusts are irrevocable—neither creditors nor the winner of a lawsuit can access funds designated for the beneficiary.

Source: investopedia.com

Benefits of a Special Needs Trust

Establishing a special needs trust can have benefits for both parties. The beneficiary has a way to receive financial support without putting their eligibility for income-restricted programs or services in jeopardy. Meanwhile, the person or party that creates the trust has some reassurance that the proceeds will go to expenses they stipulate.

When a third party puts money in a special needs trust, the party is assured that the money will be used for its intended purpose. For example, parents might put assets in a special needs trust to provide for their disabled daughter instead of giving that money to their son. Special needs trusts are irrevocable, and their assets cannot be seized by creditors or by the winner of a lawsuit.

It is important that the person who creates the trust or their legal representative word the terms of the trust documents very carefully to ensure its validity, and to confirm that the directives and purpose of the document are explicitly clear. The special needs trust must be established before the beneficiary turns 65.

Source: investopedia.com

Providing For A Family Member with a Disability

The primary purpose of a special needs trust is to provide for the needs of an individual without disrupting that person’s eligibility for Medicaid and Social Security and other government benefits. The experienced supplemental benefits trust attorney SpecialNeedsTrustsOnline.com, can structure the trust to make sure your loved one has the provisions necessary to maintain his or her quality of life without losing government benefits.

We provide comprehensive estate planning services to families throughout Massachusetts and across the United States.

Arrange for a free consultation today about creating a special needs trust.

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Special Needs Trusts Online Can Help!

I am a Special Needs Trust Attorney and I am here to help. I am the founder of a nonprofit 501(c)(3) corporation that provides quality affordable Special Needs Trusts to families. I have over 20 years of experience helping families just like yours. Find out more information at SpecialNeedsTrustsOnline.com or click here to set up a free appointment.

The Main Bullet Points Of How A Special Needs Trust Works

  • Establishment: A Special Needs Trust (SNT) is created to manage assets for the benefit of an individual with a disability, known as the beneficiary.
  • Funding: Assets, such as cash, investments, or real estate, are transferred into the trust by the grantor, typically a parent, guardian, or relative of the beneficiary.
  • Trustee: A trustee is appointed to manage the trust assets and make distributions according to the terms outlined in the trust document. This could be a family member, friend, attorney, or professional trustee.
  • Government Benefits Preservation: One of the primary functions of an SNT is to preserve the beneficiary’s eligibility for means-tested government benefits, such as Supplemental Security Income (SSI) and Medicaid, by keeping assets in the trust rather than in the beneficiary’s name.
  • Supplemental Support: The trust can provide supplemental support to enhance the beneficiary’s quality of life, covering expenses not met by government benefits, such as medical treatments, therapy, education, housing, transportation, and recreational activities.
  • Discretionary Distributions: Distributions from the trust are made at the discretion of the trustee, based on the beneficiary’s needs and best interests, rather than as direct payments to the beneficiary.
  • Trust Administration: The trustee manages the trust assets, invests them prudently, keeps accurate records, files tax returns, and ensures compliance with legal requirements.
  • Termination: The trust may terminate upon the beneficiary’s death or upon exhausting its assets, at which point any remaining funds may be distributed according to the terms of the trust document, such as to other family members or charitable organizations.
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What can a Special Needs Trust pay for?

Overview of what a special needs trust can pay for

Sometimes it is difficult to figure out what expenditures are appropriate from a Special Needs Trust. Confusion may arise because of differences in state law, trust size, age or condition of the beneficiary, terms of the trust itself, or any number of other variables. To compound the problem, there has been little direct guidance from the courts, and the legal literature is far from extensive.

Source: specialneedsalliance.org

The Range of Choices.

A Special Needs Trust might have been created to handle proceeds from a personal injury settlement or an inheritance left directly to an individual with a disability. It might be designed to protect eligibility for Supplemental Security Income (SSI), Medicaid or other public benefits programs — or for a number of programs (usually including those two) at the same time. Common questions about use of trust money revolve often revolve around travel and entertainment, transportation and housing — but all manner of other expenditures crop up as an issue from time to time.

In one case, a mother acting as trustee might wonder about her ability to pay another family member for personal care not covered by Medicaid. In the next, a corporate trustee might be willing to pay for a trip to Disney World, but not know how to cover the costs or whether to pay for other family members who travel with the trust beneficiary. In yet another, the father who established the trust might chafe at the suggestion that he should not use money he contributed to the trust to pay for improvements on the family home.

Source: specialneedsalliance.org

Where to Look for Answers.

The first advice to a trustee is usually to look at the trust document itself. It may be fine that state and federal law permit a particular expenditure, but if the trust does not then the trustee cannot take advantage of the government’s flexibility. Sometimes there is nothing to prohibit a proposed expenditure in public benefits law or the trust document, but that still might not mean that the purchase is appropriate — it might be imprudent considering the circumstances, or a violation of general trust administration principles.

All that said, the very purpose of Special Needs Trusts is usually to provide extra, or supplemental, items to the beneficiary — the things that the system, family and other sources cannot or will not provide. One of the very few court cases addressing this concept is a 2004 Minnesota Court of Appeals case, In re: The Irrevocable Supplemental Needs Trust of Collins.

Mr. Collins had been appointed trustee of a Special Needs Trust for the benefit of his teenage daughter. Over the course of five years, he used trust income and assets to pay for a number of items that later were challenged in court. A local judge ordered Mr. Collins to repay a little more than $2,000 of allegedly improper expenditures.

What had Mr. Collins paid for with trust funds that got him in trouble? Among other things, he had purchased a snowmobile for her when she was 13, and Britney Spears concert tickets for her a year later. The Judge reviewing his accounting decided that some of those expenditures were inappropriate for a young beneficiary, and that was why Mr. Collins was ordered to return the funds from his own money.

Source: specialneedsalliance.org

The Court of Appeals Reviews the Accounting.

Mr. Collins appealed the order directing him to return funds, and the state Court of Appeals (one step below the state Supreme Court in Minnesota) agreed with him. The proper approach, ruled the appellate court, was not to second-guess the trustee as to each expenditure, but to determine whether the trustee was properly exercising his discretion. Since the whole point of a Special Needs Trust (or, as the trust was called in this case, a “Supplemental Needs” Trust) is to provide for extra benefits that are not otherwise available, the trial judge here should have presumed that a trustee/father knows best whether his daughter is mature enough to ride a snowmobile or attend a Britney Spears concert.

The Minnesota case gives some insight into how judges — at least appellate judges — view Special Needs Trust expenditures, but it does not provide much assistance. That is partly because the decision was “unreported.” That means that the judges decided that it should not be made available to cite as precedent. Even if it had been reported, it might not be very useful outside of Minnesota.

Nonetheless, the Collins case can give us some assistance in determining whether a given expenditure should be approved from a Special Needs Trust. Among the items to consider in a given case:

1. Is the expenditure permitted by the trust terms? Is it prohibited by Medicaid or Social Security regulations?

2. Does the expenditure clearly benefit the trust’s beneficiary? Does it also benefit others, such as family members? If it benefits the trustee (as, for instance, a home improvement that clearly aids the beneficiary but also increases the value of the home owned by a parent/trustee), it should be scrutinized much more closely, and may not be permissible in all circumstances.

3. Is there enough money in the trust to make the proposed payment without seriously affecting the ability to provide other benefits in coming years? Not every expenditure that reduces future benefits is forbidden, but the larger the expenditure (in relation to the trust’s size), the harder it is to justify.

4. Is the proposed expenditure related to the purpose for which the trust was established? In other words, if the trust came from a personal injury settlement it will ordinarily be easier to approve expenditures for therapy or adaptive equipment related to the injury for which the settlement was obtained.

5. Are there other sources of funds? If public benefits are available to provide the same items, the money ordinarily should not come from the trust. But if the public benefits are so limited that the quality of the items will suffer, or if it takes an extremely long time for equipment or services to get to the beneficiary, the trust might still be available to make the purchase more quickly or to purchase better supplies or equipment. Where family resources are available, it might be better to save trust funds — especially if the beneficiary is a minor, and parents have a general obligation of support.

There will, of course, be other considerations in each case. We do not mean to give an encyclopedic list here, so much as to suggest that decisions about expenditures can be very difficult. It is not enough for the trustee to really, really want to make the expenditure, or to be completely convinced it is appropriate — it is important to consider the proposal from all sides, admitting that there may be good reasons not to proceed, as well. The key is that the trustee must act reasonably, remain free from self-interest or bias, and above all, be prudent.

Source: specialneedsalliance.org

How Does a Trustee Act Prudently?

The best way to assure that proper decisions are made, and to minimize the possibility of later difficulties, is to seek independent advice from a qualified legal expert. While many lawyers may insist that they know how to draft Special Needs Trusts, not all of them have experience dealing with state and federal agency treatment of expenditures.

Sometimes it may be appropriate to consider the options and risks, to make an expenditure and report it to the appropriate government agency and wait for a response. Sometimes it may be better to seek the blessing of the court system, giving notice to government agencies as appropriate and asking for a determination of the validity of the proposed expenditure in advance. The Special Needs Alliance advisor you consult will be able to give you guidance with expenditures, accounting requirements and government benefits.

 

Source: specialneedsalliance.org

Special Needs Trusts Online Can Help!

I am a Special Needs Trust Attorney and I am here to help. I am the founder of a nonprofit corporation to that provides quality affordable Special Needs Trusts to families. I have over 20 years of experience helping families just like yours. Find out more information at SpecialNeedsTrustsOnline.com or click here to set up a free appointment.

Source: specialneedstrustsonline.com

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Special Needs Estate Planning

Introduction to Special Needs Estate Planning

Families with special needs children must exercise extra care in making their estate plans. This is true whether their special needs child is still a minor or now an adult, and particularly so when the child is or in the foreseeable future will be — receiving needs-based public benefits such as SSI or Medicaid. While planning considerations for such a child will vary depending upon the child s age, competency, and other family considerations, the goal is always the same: parents want their estates utilized to enhance and enrich the life of their special needs child while maintaining the child s enrollment in essential public benefits programs. These goals can be met through the use of a properly prepared special needs trust.

The essence of all special needs estate planning is to ensure that the portion of the parents estate which passes to their special needs child at the time of their death is not considered an available asset, as defined by public benefit agencies. Parents must be mindful of both income and principal, as too much monthly income, as well as too much cash, can negatively impact their child s future eligibility for benefits.

Source: specialneedsalliance.org

Purpose

Special needs planning works to preserve public benefits for the disabled child while supplementing and enhancing the quality of the child s life. This type of planning is useful for many different purposes, including

lifetime money management for the benefit of the disabled child;

protecting the child s eligibility for public benefits; and

ensuring a pool of funds available for future use in the event public funding should cease or be restricted.

Source: specialneedsalliance.org

Planning Options

The options available to families in making an estate plan for a special needs child who is receiving needs-based public benefits include the following:

Disinherit the child. This is the simplest option, but it does nothing to accomplish the essential purpose of enriching the life of the special needs child.

Give the estate to the brothers and sisters. At the parents death the entirety of the estate is distributed to the child s siblings, with the understanding that they will take care of their disabled brother or sister. There are inherent risks with such an approach, including claims by the siblings creditors, bankruptcy, divorce, mismanagement of funds, etc. This may be appropriate when the child s potential inheritance is modest.

Leave an inheritance to the disabled child. The outcome of this planning option will be the almost certain negative impact on the child s continued eligibility for publicly funded benefits. At the least, benefits may be reduced. In the worst case scenario, the child may be rendered ineligible for SSI and Medicaid, and with this ineligibility for assisted housing, supported employment, vocational rehabilitation, group housing, job coaching, attendant personal care aides, and transportation assistance. The key benefit is Medicaid, as this program represents the child s ability to access not only essential health care but many other public assistance programs.

Leave any inheritance in a Special Needs Trust. This last option will be preferred by most families in their efforts to provide and ensure a positive outcome for a special needs child. By using a properly drafted and properly administered Special Needs Trust, the child will continue to qualify for public assistance programs that would otherwise be unavailable to the child, especially the means tested programs that require the child to meet strict financial eligibility criteria. A Special Needs Trust works because the assets held in the trust are not available to the child. These types of trusts must be discretionary spendthrift trusts, with strict limits on the trustee’s ability to give money to the child. Under no circumstances can the special needs child force the trustee to make trust money available to the child. An additional benefit of the Special Needs Trust is that because the child is often unable to manage his or her own finances, the parents, in creating the trust, will appoint a trustee to act as the child’s money manager, and in so doing, ensure proper financial management after their death.

Source: specialneedsalliance.org

Special Needs Trusts Online Can Help!

I am a Special Needs Trust Attorney and I am here to help. I am the founder of a nonprofit corporation to that provides quality affordable Special Needs Trusts to families. I have over 20 years of experience helping families just like yours. Find out more information at SpecialNeedsTrustsOnline.com or click here to set up a free appointment.

Source: specialneedstrustsonline.com

 
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