A Special Needs Trust (also called a Supplemental Needs Trust) is a legal document that holds assets for a person with disabilities, while also providing legal authority for a trustee to manage money and make financial decisions on behalf of the individual with special needs.
The Special Needs Trust also helps to ensure there are enough financial resources
available to meet the individual’s long-term care needs, without jeopardizing eligibility for
state or governmental aid. This aspect is key, as benefits such as Social Security or Medicaid are very limited and cannot possibly cover all expenses a person with special needs may need to live out his or her life in a secure and comfortable way.
Unfortunately, many parents think that the answer to this problem is to leave their child with disabilities a large inheritance when they die…but this is a mistake. While an inheritance may give the child a “cushion” for the future, it could cause him or her to become
ineligible for benefits that the child relies on for healthcare and other day-to-day needs.
Again, the good news is that a Special Needs Trust can help preserve eligibility for benefits while also making sure there is enough money available for the child’s future care. But, the Special Needs Trust must be set up correctly to ensure the trust works as planned.
To that end, it’s important for parents of special needs children and adults to avoid the following mistakes when setting up this legal document:
- Procrastination: When you have a child
with special needs, it’s a huge mistake to put off planning. You just
never know when you might become incapacitated or die. But, it is even more
critical for parents of special needs kids to plan early. That is
because a child with special needs may not be able to work and provide for
their own financial well-being when they become adults. Having a Special
Needs Trust set up while the child is still young will allow others to make
contributions and gifts through the years in a way that doesn’t penalize the
- Trying to cut corners with “DIY” or online options. Special Needs Trusts should be created by a lawyer who focuses in this area of the law because special needs trusts are subject to both federal and state laws, and the laws of each state can vary. Likewise, the ins and outs of benefit programs are complex, and you’ll want to work with an attorney who is well-versed in the options available to your family.
- Failing to educate trustees on expectations
and duties: Being selected to serve as a trustee of a child’s Special Needs
Trust is a big responsibility. Before choosing a trustee, we recommend talking
to that person about what may be expected of him or her when the parent is no
longer able to manage the child’s trust funds. It may even be helpful to bring
your desired trustee in to meet with your special needs planning attorney who
can run that person through some of the specific responsibilities he or she
will take on, such as paying the child’s bills.
- “Drafting it and forgetting it.” A Special Needs Trust is a living document that is flexibly designed to meet the changing care needs of a person with disabilities. To that end, a Special Needs Trust should be updated every few years to ensure that the document is up-to-date and reflects a current snapshot of the individual’s life.
A Special Needs Trust is a complex document that is designed to support and protect a person with special needs through all of the transitions that he or she may face. Working with an experienced attorney can help avoid making one of the common mistakes mentioned above, while also providing families with a roadmap for a secure future.
If you have questions about Special Needs Trusts or you need assistance getting started, please feel free to contact our law firm at 724-841-1393 to set up an appointment.