Certain clients (the “decedents”) come to us with special family needs that they are unsure about in their estate plan. These situations involve the client having family members (the “beneficiaries”) who have special needs, such as a disability, a chronic illness, or an injury that has those beneficiaries relying on government assistance.
Special Needs Trust / Supplemental Trust
We recommend in these instances that the client create a special needs trust, which either can be part of a testamentary trust within a will-based plan, or a standalone revocable trust governed by private trust administration. Other equivalent terms for a special needs trust are “supplemental needs trusts” and “supplemental trusts.”
A special needs trust must be funded, like any other trust, before it can effectively operate to distribute assets to a named beneficiary. This means that the decedent or some other individual must place assets into the trust before the selected trustee (the “fiduciary”) may distribute those assets from the special needs trust to the named beneficiary.
Concerns & Restrictions
The primary concern is that receiving government assistance for a disability or injury includes restrictions on how much and when the government assistance funds may be taken out.
A special needs trust prevents a named beneficiary from experiencing breaks or not enough assistance from government assistance upon the death of the client.
These distributions from the special needs trust supplements the receipt of government assistance so that the beneficiary may still obtain government assistance money, but the beneficiary will also have access to additional funds as provided for by the special needs trust.
An example of the use of a special needs trust is: In the event that the decedent gives the beneficiary an outright gift and that gift exceeds the applicable government limit, the beneficiary can actually lose their Supplemental Security Income (“SSI”).
Create a trust you can count on
A well-structured special needs trust prevents this situation from occurring. Careful estate planning for a special needs trust should be conducted by an experienced attorney when considering your family’s special needs situation.