What is a Special Needs Trust?

Supplemental Security Income and Medicaid are critical sources of support for those with disabilities, both in benefits and services.

To be eligible, a disabled person must satisfy restrictive income and resource limitations.

That’s why many families ask elder law and estate planning attorneys about the two types of special needs trusts.

Moberly Monitor’s recent article, “Things to know, things to do when considering a special needs trust,” explains that with planning and opening a special needs trust, family members can hold assets for the benefit of a family member, without risking critical benefits and services.

If properly thought out, families can continue to support their loved one with a disability long after they’ve passed away.

After meeting the needs of their disabled family member, the resources are kept for further distribution within the family. Distributions from a special needs trust can be made to help with living and health care needs.

To establish a special needs trust, meet with an attorney with experience in this area of law. They work with clients to set up individualized special needs trusts frequently.

Pooled trust organizations can provide another option, especially in serving lower to more moderate-income families, where assets may be less and yet still affect eligibility for vital governmental benefits and services.

Talk to an elder law attorney to discuss what public benefits are being received, how a special needs trust works and other tax and financial considerations. With your attorney’s counsel, you can make the best decision on whether a special needs trust is needed or if another option is better, based on your family’s circumstances.

Reference: Moberly Monitor (October 27, 2019) “Things to know, things to do when considering a special needs trust”

Social Security Disability Benefits for Children Under the Age of 18

If you have a child with a significant disability, you might think the child would automatically qualify for government benefits. However, in reality, you will have to jump through several hoops. In addition to any assistance your state might provide, your child might be eligible for Supplemental Security Income (SSI) benefits. Here is an overview of the process for going after Social Security disability benefits for children under the age of 18.

The Social Security Administration (SSA) uses a two-part procedure for determining whether a child is eligible to receive disability benefits. The adult acting on the child’s behalf must complete and file:

  • An Application for Supplemental Security Income, and
  • A Child Disability Report

The Application for Supplemental Security Income for a Child Under the Age of 18

The SSA does not provide an online Application for Supplemental Security Income for a child under the age of 18. You will have to fill out the printed form. These forms can be confusing, but do not give up. You can call your local Social Security Office or go by their office to schedule an appointment to complete the application paperwork with an agent of the SSA. The agent can help you in person or over the telephone.

The SSA usually does not publish the telephone numbers of their local offices, so you will have to call the main number to get connected to your local office. The main SSA phone number is 1-800-772-1213 (TTY 1-800-325-0778).

Your local office can help you determine whether the child meets the financial requirements for SSI benefits. The countable income and assets of the child and parents must not exceed the allowed amount. The SSA excludes many assets from consideration, which is why they use the term “countable income and assets.”

The Child Disability Report

You can complete the Child Disability Report online. If you want assistance with the form or would prefer not to use the online form, you can call the SSA for help. Whether you complete the Child Disability Report online or at an SSA office, you will have to sign a document that authorizes the SSA to talk with your child’s doctor about the medical condition that is the cause of the disability.

You can provide records you already have, and the SSA will make a copy so you can keep your records. You do not have to collect documents you do not already have. Since you have to give the SSA permission to contact the child’s health care providers, the agency can request the records for their evaluation of the application. Depending on the facts of your situation, the SSA might find these records of the child useful:

  • Medical records
  • Prescriptions or pharmacy medication containers
  • Individualized Education Program (IEP) from the child’s school
  • Individualized Family Service Plan

Sometimes people start an online Child Disability Report and realize the need more time or information to complete the form. If you find yourself in that situation, write down the re-entry number you get from the SSA website. You can use that number to go back to the Child Disability Report, when you are ready to finish the form.

It can be useful to talk to an elder law attorney in your area about planning for your child’s future and how your state’s regulations might vary from the general law of this article.

References:

Social Security Administration. “Apply for Disability Benefits – Child (Under Age 18).” (accessed August 29, 2019) https://www.ssa.gov/benefits/disability/apply-child.html

Special Needs Families and Special Needs Trust

If nothing prepares a person for parenting, consider how much harder it is to be prepared to raise a child with special needs. Parents often sink in uncharted waters. It’s not just a matter of negotiating all of the day-to-day details, says Newsday in the article “Be ‘biggest advocate’: Parents plan future for adult children with special needs.” Special needs families need to plan for what will happen as the parents age, become ill or die.

As an adult child with disabilities ages, eventually there will be medical issues. If the parents are gone, who will be able to make medical decisions? Where they live, who will oversee their finances and who will be there for them to rely on in a parenting role? There are many questions and they all need answering.

For one family, raising their special needs daughter was a full-time challenge. Their daughter, now 24, has autism. The couple sought out others in their same situation, noting that often even their own family members could not relate to their daily experiences.

It takes a village for special needs families to do more than survive. That includes estate planning and elder law attorneys with deep experience in special needs planning, social workers, therapists and medical professionals. Here’s what needs to be top-of-mind:

Don’t wait to plan. Families often think they have time, but you never know when unexpected events occur. Have a plan in place for legal guardianship, finances and health care.

Work with experienced legal help. You want to work with an attorney who has a great deal of experience and knowledge in special needs law and estate planning. Someone who dabbles on the side of a real estate practice is not the right professional for the task.

Stay in control. When children turn 18, they are adults. Parents and guardians will need to go through Surrogate’s Court to become the child’s guardian. Unless that is done, the parents and guardians will have no legal rights about the child’s medical, financial or other affairs. A successor guardian also needs to be named, so that when the parents are no longer able to serve, someone is in place to care for the child.

Create a Special Needs Trust. A trusts attorney with experience in Special Needs planning will be able to work with the family to create and structure a Special Needs Trust (SNT). A disabled person usually cannot earn enough to support himself, or the caregiver who remains at home to care for them and care-related expenses. The SNT helps to meet current needs and plan for future needs. The trust is used to preserve eligibility for any means-tested state and federal benefits. It allows the individual to have a better quality of life, by providing for expenses that are not covered by their benefits.

It’s very important that no assets be left to the child in an inheritance. Any assets must be placed in the trust. A well-meaning relative could put their eligibility for aid in jeopardy.

Parents and guardians also need to name a trustee and a successor trustee. The person needs to be competent, good with money management, organized and focused on caring for the loved one. It cannot be an emotional decision.

Parents of special needs children are advised to create a Letter of Intent, a narrative that outlines their child’s likes and dislikes, strengths and weaknesses, activities and friends they enjoy and other details that will help them to continue an enjoyable life, when their parents are gone.

Parent’s own estate planning must be done with an eye to maintaining the SNT and caring for their other children. This is a case when assets need to be distributed in a realistic and fair manner. If one sibling is the successor trustee, for example, they may need a larger portion of an estate to help care for their sibling.

Reference: Newsday (May 9, 2019) “Be ‘biggest advocate’: Parents plan future for adult children with special needs.”

Estate Planning When a Family Member Is Disabled

This kind of mistake can wreak havoc on many lives, which is why it is so important to work with an experienced estate planning attorney who is knowledgeable about special needs planning. The article, “Crafting an estate plan to include disabled family members” from The Ledger explains what is involved in special needs planning.

Supplemental Security Income (SSI) is a federal program that pays monthly benefits to disabled or blind adults and children. To qualify, an individual must have fewer than $2,000 of countable assets and very limited income. Medicaid is a Federal and State health insurance program that helps people with limited assets and income pay for their medical costs.

While it is common for people to name their spouse or children as beneficiaries in their estate plan, if your spouse or child is disabled and receiving government benefits, an inheritance will result in their loss of benefits, unless special planning is done.

A Special Needs Trust (SNT) is designed for disabled beneficiaries so that cash, real property, or any other assets are available for the person’s benefit, while still allowing the disabled person to receive their means-based government benefits.

There are several different ways to accomplish this, depending on your family’s situation. One way is to have a testamentary Special Needs Trust created within a will or trust that goes into effect, when the creator of the trust or the will dies. A SNT can also be created while you are living and can be funded, instead of waiting for it to go into effect at your death.

A third-party SNT can be named as the beneficiary of life insurance policies and retirement accounts, investment accounts or real property. The third-party SNT assets that are not used for the disabled beneficiary during their lifetime, can pass to non-disabled beneficiaries upon the death of the disabled beneficiary.

These assets will be free from Medicaid recovery liens, since the property in a third party SNT does not belong to the disabled beneficiary.

A first party SNT is set up and funded with assets that do belong to a disabled person, and no other funds can be contributed to this type of trust by any other donors. These are often used when a large settlement following an injury is awarded. In Florida and in other states, first-party SNTs are subject to Medicaid recovery to reimburse the state.

Special needs trusts are complicated trusts and require the knowledge of an experienced attorney who devotes most, if not all, of their practice to SNTs and trust and estate planning.

Reference: The Ledger (May 2, 2019) “Crafting an estate plan to include disabled family members”