Special Planning for a Loved One with Special Needs

The most thoughtful and considerate life care plan for your loved one with special needs is nothing more than a thoughtful and considerate plan unless you determine ahead-of-time how to subsidize it.  While you can certainly provide an inheritance for your loved one with special needs, you do not want him or her to receive that inheritance outright, as it may jeopardize any government benefits he/she is receiving (e.g. Supplemental Security Income (SSI) and Medicaid).  Oftentimes Medicaid is the only health insurance for which your loved one with special needs is eligible.  Government benefits such as these provide quite limited benefits, however, and certainly do not enable your loved one with special needs to enjoy a great quality of life.  Instead, parents and family members often supplement these benefits to provide the quality of life a loved one with special needs should enjoy.  However, as mentioned previously, if you leave any assets outright to your loved one with special needs, you jeopardize your loved one’s continuing eligibility for these government benefits.

Special Needs Planning

Develop a Special Needs Plan

Fortunately, the government has provided rules which allow you to leave assets to your loved one with special needs, so long as the assets are left to him or her in a “supplemental needs” trust, without jeopardizing your loved one’s eligibility for these important government benefits.

What is a supplemental needs trust?

A supplemental needs trust enables your loved one with special needs to have an unlimited number of assets held in trust for his or her benefit.  If the trust is properly drafted, these assets will not be considered countable for purposes of qualification and eligibility for need-based government benefits programs (e.g. Supplemental Security Income (SSI), Medicaid, vocational rehabilitation, subsidized housing, etc.).  Assets in a supplemental needs trust are solely available to pay for the needs of your loved one which are not already covered by government benefits.  Therefore, if properly structured, your loved one’s basic needs and healthcare will be covered and funded by government benefits while the assets in the supplemental needs trust will be available to enhance your loved one’s quality of life (by providing for supplemental and extra care above and beyond what the government provides).

What care and needs of my loved one can a supplemental needs trust cover?

Properly drafted, a supplemental needs trust will work on a “sliding scale.”  If the government pays for 100% of your loved one’s needs, then the trust will not pay a dime toward that need.  However, if a government benefit does not cover a particular need of your loved one, then the trust may pay for 100% of the cost for that need.  Of course, most needs fall somewhere in the middle of those two extremes.  Therefore, most often the trust will only pay for and “supplement” the need of your loved one after the government has already paid all that it will toward the cost of that need.  Once the government has paid all that it will pay, the assets in the trust may be used to pay for the rest of the cost of providing for the need of your loved one with special needs.

Why do things have to be so complex . . . can’t I just leave the inheritance for my loved one with special needs to my other trusted child and that child will look after his or her needs?

Inheritance Problems Special Needs

Unfortunately, such “disinheritance” of your loved one with special needs may prove extremely problematic.  No matter how well-intentioned your trusted child may be, you are leaving the inheritance for your child with special needs in a tenuous position.  Your trusted child my find himself or herself in financial difficulty and “borrow” the money ear-marked for your special needs child and then never be able to repay it.  Your trusted child may enter into a divorce, at which time any assets in your child’s name (including those ear-marked for your loved one with special needs) will become part of the divorce proceedings and could be levied by the soon-to-be ex-spouse.  Even if these very real perils never become reality, there are still potential gift tax consequences to your trusted child for using his or her inherited funds (even though they may be ear-marked for your child with special needs) to pay for the needs of your child with special needs.  All of these issues and many more could be negated by simply leaving your loved one’s inheritance in a supplemental needs trust, ensuring that those inherited funds will be held only for the benefit of your loved one with special needs.

Our family is independently wealthy and we aren’t concerned about government benefits, so why should we care about creating a supplemental needs trust for our loved one with special needs?

Even if you don’t believe your loved one with special needs will ever require the assistance provided by government benefits, why peremptorily sacrifice those services that may be needed later down the road?  No one has a crystal ball to determine exactly how the life of your loved one will turn out and what services and benefits may be needed later in life.  It is best to plan proactively and leave all of your loved one’s inheritance in a supplemental needs trust to ensure those assets are used in the best manner possible.  After all, wouldn’t it be horrible if your loved one’s inheritance was used up completely before his or her passing and instead your loved one’s quality of life suffered due to your lack of planning?  The government has special rules which enable everyone, regardless of wealth, to leave an inheritance for their loved ones’ with special needs in a protected supplemental needs trust so as not to jeopardize eligibility for current or future government benefits.  Take advantage of the estate planning opportunities the government provides and ensure your loved one with special needs enjoys the highest quality of life possible.

Okay, I understand why a supplemental needs trust is recommended, but what does it entail?

At the very least, a supplemental needs trust must be clear that it is intended to provide supplemental funding to any services covered in whole or in part by government benefits.  If properly drafted, the trust will ensure that your loved one preserves any government benefits eligibility while also preserving the assets in the trust to ensure they are used solely for the supplemental needs of your loved one with special needs (those needs that go beyond food, shelter, and clothing and the medical and long term supports and services of Medicaid).  The assets in the supplemental needs trust can fund those additional needs not funded through government benefits and ensure your loved one receives the quality of life you envision and your loved one deserves.  Importantly, however, assets in the trust may not be distributed directly to your loved one; instead, the assets may be paid to third parties who provide goods and services for the use and enjoyment of your loved one with special needs.  Some of the life-enhancing expenditures that a supplemental needs trust may pay for include, but are not limited to, the following:

  • Annual check-ups at independent medical facilities
  • Supplemental education and tutoring
  • Out-of-pocket medical and dental expenses
  • Transportation (including the purchase and maintenance of a vehicle)
  • Purchase of materials for hobbies and social activities
  • Funds for trips and vacations
  • Funds for entertainment (e.g. movies, shows, recreational games)
  • Quality of life goods and services (e.g. computers, videos, furniture, electronics)
  • Special dietary needs
  • Personal care attendant

Supplemental needs trusts are a critical component of your estate planning if you have a loved one with special needs.  Due to the nuances of planning structured under federal, state, and local regulations and procedures, it is highly recommended that you consult with an estate planning attorney who is experienced with supplemental needs trust planning.

What happens to any money that may still be in trust when my loved one with special needs passes away?

It depends upon what type of supplemental needs trust is created and what the provisions of the trust state.  Generally, if a supplemental needs trust is funded with money from the parents or family members of a special needs child, then any money that remains in the trust upon your loved one’s passing may be designated to be inherited by whomever you select (presumably your other children/beneficiaries).  None of the money in that type of the trust must be paid to the government for benefits your loved one received during his or her lifetime.  Furthermore, if the supplemental needs trust is funded with assets your loved one received from a properly court-ordered award from a personal injury settlement, then any remaining monies in this type of trust also may not need to be repaid to the government.  On the other hand, if the supplemental needs trust is funded with the personal assets of your loved one with special needs (e.g. work earnings, savings, non-court-ordered personal injury awards, etc.), the government may recoup any remaining trust funds upon your loved one’s passing, up to the amount of money the government spent on your loved one during his or her lifetime.

I would like to learn more about creating a supplemental needs trust for my loved one with special needs, what should be my next step?

Planning for disabled heirsAs mentioned previously, there are many nuances associated with this type of planning which is structured under federal, state, and local regulations and procedures.  Therefore, it is highly recommended that you consult with an estate planning attorney who is experienced with supplemental needs trust planning.

Four Pillars Law Firm is an experienced special needs practice, familiar with the particular needs of those families coping with the needs of loved ones with special needs.  We understand the unique legal needs, as well as the complex strategies for asset protection and financial well-being, available to your loved one and your family at each stage of your loved one’s special needs.  More specifically . . .

Four Pillars Law Firm can Help You and Your Loved One with Special Needs:

  • Preserve your loved one’s inheritance for their sole benefit and needs;
  • Calm your fears caused by misinformation and anxiety of the unknown;
  • Avoid common mistakes which may disqualify your loved one from receiving government assistance, now as well as in the future; and
  • Provide compassionate and understanding guidance when you need it most.

Our Professional Legal Services are Designed to:

  • Provide a life care plan for preserving your loved one’s quality of life and ensuring the inheritance you leave your loved one will be there when he or she needs it;
  • Empower you, your loved one, and your family to make important decisions now about the life care plan of your loved one with special needs so as to maximize personal independence;
  • Enhance the quality of life enjoyed by your loved one with special needs.

If you would like to learn more about what we can do for you and your loved one, please Contact Us today.

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