What is special needs planning?
Special Needs Planning encompasses the use of specially crafted wills, trusts, powers of attorney, and other documents to address the special needs that we or our loved ones may have. Proper planning can prepare for a wide range of disabilities, including:
Cognitive: Autism, Down's Syndrome, Trauma (TBI), or Dementia
Physical: Stroke, Spinal Cord Injury, Muscular Dystrophy, Cerebral Palsy, Spina Bifida, or Multiple Sclerosis
Sensory: Blindness or Partial Blindness, Deafness or hearing loss, or ASD
Special Needs Trusts
What is a special needs trust?
The purpose of a Special Needs Trust is to protect assets in a way so that those assets, or a portion thereof, can be used to enhance a disabled person’s quality of life by helping meet their needs while also permitting them to qualify for available public benefits programs. A disabled person will likely require specialized goods and services. And depending on the age and nature of the disability, these goods and services can cost a substantial amount of money and/or not be fully provided for under public benefits programs.
In other words, Special Needs Trusts are used to supplement, but not replace, the benefits that a disabled person may be entitled to. They can be used to finance a private room in a nursing facility, hire extra caregivers, gain access to entertainment and recreation, and pay renovations to the individual’s personal residence.
Special Needs Trusts are great tools when someone can benefit from a means-tested public benefits program but do not qualify because they are over-resourced (i.e. too many assets). They are also useful when a disabled person comes into a large sum of money through inheritance or a judgment from a lawsuit.
What types of special needs trusts are available?
Special Needs Trusts generally come in two main forms: (1) First Party Special Needs Trusts (Self-Settled), and (2) Third Party Special Needs Trusts. The difference between the two simply describe the source of funding for the trust. In other words, First Party Special Needs Trusts will be funded by the disabled individual him or herself, and Third Parts Special Needs Trusts will be funded from outside sources – usually a parent or grandparent.
When a disabled person needs access to public benefits but is ineligible due to being over-resourced, or when their current eligibility is jeopardized due to a sudden inheritance or court judgement in their favor, First Party Special Needs Trusts can be helpful in gaining or maintaining their eligibility. However, it is important to discuss both the benefits and drawbacks of using First Party Special Needs Trusts, as well as understanding the specific requirements of creating, managing, and funding the trust.
Third Party Special Needs Trusts are traditionally the preferred type of Special Needs Trust because they are not subject to state agency liens, estate recovery requirements, or Medicaid transfer penalties. Third Party Special Needs Trusts are commonly set up as part of a comprehensive estate plan that has identifiable or potential special needs beneficiaries.
Utilizing any form of a Special Needs Trust demands knowledge of the type and amount of available assets. Depending on the nature of the client’s assets and their specific situation, we can implement more practical solutions without the use of these trusts.
Questions About Special Needs Planning? Contact Us Below: