If Your Child Has Special Needs, Consider This
If your child has a disability it’s important to learn all about Special Needs Trusts. A SNT is an essential tool for anyone with a physical or mental disability. It protects and retains assets, while preserving eligibility for government benefits, including all Medicaid services such as therapy and recreation programs. With an SNT, a family ensures that a child remains eligible for vital government benefits they may need now or in the future, while enjoying a trust fund for extras that would otherwise disqualify them for those benefits.
HOW IS AN SNT FUNDED?
An SNT is most often funded with an inheritance or money received from a medical malpractice or personal injury lawsuit. An SNT is essential if a disabled person stands to inherit family money, which would make them ineligible for government benefits they may need in the future.
The beneficiary of an SNT must be a person with a disability under age 65 at the time the trust is created and funded. The trust must be created by a parent, grandparent, guardian, or court order for the sole benefit of the beneficiary. Under the law, a disabled individual cannot create or manage his or her own trust, even if he or she is otherwise legally competent.
HOW TO CREATE AN SNT
It is essential that an SNT be created by a legal professional who specializes in establishing this kind of trust. The Academy of Special Needs Planners and the Special Needs Alliance, two professional groups, offer referrals to qualified lawyers and other resources. Once the trust is established, a trustee must be appointed to manage and oversee the trust, and to make sure the money in the trust is used in ways that do not compromise the beneficiary’s eligibility for government benefits. For instance, the money in the trust can only be used for things that are not already covered by government benefits, and for things that are for the sole benefit of the beneficiary. This may include but is not limited to, vacations with a companion, recreation, transportation, private medical insurance or and/or doctor’s visits, personal electronics, even toiletries. A trustee must be very careful when authorizing expenditures from the trust; if the trust is used for things that are already covered by government benefits they are receiving, the beneficiary could become ineligible for those benefits.
Special needs trusts can be funded with a wide range of assets including annuities, stocks, bonds, mutual funds, cash-value life insurance, personal property and real estate. Special customized products and structures are also available through various recovery management firms. In the case of a court setting up the SNT, the judge will have the final say on how the trust should be funded, and Medicaid can also dictate terms. Setting up an SNT can cost $4,000 or more, depending how complex it is and the going rate for standard legal fees in your state. There are also management fees involved: Trust companies on average charge about 1% of assets annually. In most all cases, these costs and fees can be paid for out of the trust.
Trustees approve and disburse payments for the benefit of the beneficiary. They are also required to prepare annual accountings and file them with government agencies and in some cases the court that created the SNT. When asked, trustees must provide documentation and explanation for expenses and correspond with any government agencies requesting information about the trust.
WHAT’S THE CATCH?
Because an SNT allows its beneficiary to remain eligible for government benefits while enjoying assets that would otherwise disqualify them, in some cases there is a “payback” provision for those benefits. For instance, if the trust was funded by a personal injury lawsuit settlement or with money that was in the beneficiary’s name before the trust was established, Medicaid must eventually be reimbursed by the trust for all expenditures over the beneficiary’s lifetime.
To determine whether a Special Needs Trust would benefit your child, visit these websites for more information and contact a lawyer who specializes in these kinds of trusts.
By Dana Linett-Silber