Planning is not optional for parents or grandparents of children with special needs. It is crucial to ensure that the child will have the ordinary comforts of life that are not provided by government assistance. A special needs trust is frequently the most effective way to provide security and quality of life for a special needs individual. A special needs trust is a legal arrangement where a trustee holds and distributes trust assets for a beneficiary who has special needs in a manner that protects the special needs child's eligibility for government provided food, clothing, and shelter benefits via Supplemental Security Income (SSI) and Medicaid. The special needs trust provides supplemental assistance for needs not already covered by government programs. A family member can often act as the trustee and use their discretion to distribute or not distribute assets for the supplemental needs of the special needs individual. Upon the death of the special needs individual, the trust assets would go to the individual's family members, friends, or perhaps a charity. The only alternatives to a special needs trust are 1) leaving nothing to the child, or 2) creating a trust that does not contain specific Special Needs Trust language (which causes the child to lose public benefits), or 3) leaving an outright inheritance to the child which disqualifies them for public benefits. None of the above are good options when compared to a Special Needs Trust. As an estate planning attorney who has a sister with special needs, Buell & Ezell attorney Michael L. Smith is uniquely qualified to assist families with the legal and personal issues associated with special needs planning.
While it might seem like a good idea simply to leave a set amount of money to your disabled child's sibling or other close relative, with the understanding that the money will be spent on the disabled child, this often backfires:
A special needs trust avoids these potential problems without putting an emotional strain on family relations. Monthly SSI benefits can be spent on food, clothing and shelter. The special needs trust money can then go to pay for virtually any expense not met by public or private agencies such as:
Anyone other than the child with special needs can serve as the trustee. The choice of trustee is one of the most important considerations that the family will face. The trustee will be responsible for custody of the trust assets as well as determining when to distribute funds for the benefit of the child.
The trustee for a special needs trust for your disabled child could be:
To be effective, a special needs trust document:
A special needs trust can be funded through a will or gifts from relatives and friends made directly to the trust instead of to your disabled child. Life insurance can be the most cost effective and efficient method for providing the funding necessary to establish the trust and provide for the child throughout their lifetime. It immediately places assets in the trust upon the deaths of the parents or insureds.
One way to be clear about what you intend for your disabled child’s future is to draft a “Letter Of Intent” to be given to his or her trustee at the time of your death. This document gives family members and others the benefit of your knowledge about your child’s capabilities, needs and fears, and can be updated periodically.
A letter of intent can include: