Families with special needs members have more options today than ever before. As caretakers age and special needs family members reach adulthood, it’s critical to plan for the well being of all family members. Fortunately, you have many options at your disposal.
Your loved one with special needs may qualify for important government benefits. While it’s important to set funds aside for your loved one’s care, it’s also important to structure the funds in a way that your loved one doesn’t lose eligibility for government benefits.
U.S. and North Carolina law allow you to do just that. If you have a special needs family member, you can create a special needs trust that can help your loved one get the help that they need while they remain eligible for government assistance programs. Here’s how a special needs trust can help your family:
What is a special needs trust?
A special needs trust is when you set property aside in a separate legal entity. One person manages the assets in the trust for someone else’s benefit. The funds are the property of the trust, and the trustee uses them for the good of the beneficiary. The person who manages the assets in the trust is called the trustee. The person who receives distributions of property from the trust is called the beneficiary.
In the case of a special needs trust, the trust exists to help someone who lacks the ability to manage their own finances. Because of a physical or mental disability, the beneficiary needs help providing for their basic needs and managing their finances. A special needs trust is the primary way that families arrange finances to care for someone who is unable to care for themselves.
What can a special needs trust cover?
You can tailor a special needs trust to meet the needs of the beneficiary. The trust can provide for the needs of daily living, or it can provide for supplemental care like vacations, education, vocational training, recreation and more. You may create the trust to be very generic or specific depending on the needs of your loved one.
How do you structure a special needs trust to keep the beneficiary eligible for government benefits?
One of the primary purposes of a special needs trust is to ensure that your loved one remains eligible for government assistance. When you have a loved one who has special needs, there’s a good chance that they qualify for government assistance programs like Medicaid, housing or cash benefits. Medicaid can be a welcome relief for a person who may have unique and extensive medical care needs. When you set up your trust, you want to make sure that the trust doesn’t impact their eligibility for benefits.
If a person receives assets directly in their name, these assets count against them when the government determines eligibility for assistance programs. The government requires them to spend their own funds first before they’re eligible for public help. By placing the funds in a separate trust with a separate legal entity, the funds are not the property of the beneficiary. They don’t count against the beneficiary when the government looks at their assets in order to determine eligibility for assistance programs. A special needs trust is an important way that families can make sure that what they set aside for their loved ones truly goes to help their loved one and enhance their quality of life.
As you prepare the special needs trust, it’s important to pay attention to the language that you use. The trust should state that it provides supplemental care beyond what government resources already provide. You should state that the trust is not intended to provide basic support. Your trust should reference relevant portions of U.S. law that are required to protect government benefits and make your intentions clear.
What if I don’t think my loved one needs government benefits?
Even if you don’t think that your loved one needs government benefits, you never know what might happen in the future. It’s likely a good idea to structure the trust in a way that leaves the door open if they need government help in the future. Special needs trusts are an important and common wealth-management tool for people of all economic groups. An experienced special needs trust attorney can help you examine your situation to determine the best path for your family.
Who can serve as trustee of a special needs trust?
Family members can serve as trustees, or you can work with a professional third party to manage the trust. There are pros and cons to each choice. A special needs trust is often a labor-intensive asset to manage. Family members may quickly tire of all of the work involved in managing the trust. On the other hand, a professional third party may charge fees for their services that can quickly add up.
There may be restrictions on who can serve as a trustee depending on who stands to receive the trust’s funds when the beneficiary dies. If the trustees are the beneficiaries, it might create a conflict of interest. In addition to these options, you might join a pooled trust where you join with other families to pool your resources under one management company. If you use a pooled trust, you still have your separate account, but you share management expenses and fees.
Can the beneficiary fund the trust with their own property?
If the beneficiary plans to fund the trust with their own property, there are a few special things to be aware of. Yes, it’s possible for the beneficiary to fund the trust with their own resources. In most cases, a self-funded trust must provide for reimbursing the government for Medicaid expenditures when the beneficiary dies.
When the beneficiary dies, the remaining trust property goes to the government to reimburse them for their medical expenditures through Medicaid coverage. In addition to the Medicaid reimbursement requirement, a self-settled trust is only an option when the beneficiary is disabled under the government definition of disabled.
How long does a special needs trust last?
A special needs trust typically lasts until the beneficiary dies or the funds run out. You can arrange for additional transfers of property to the trust in a way that doesn’t hurt your loved one’s eligibility for government benefits.
You can structure the trust to provide whatever your loved one might need including vocational training, recreation and vacations, communication equipment, accountants, attorneys and animal service. An experienced estate planning attorney can help you create a trust that meets your loved one’s needs and gives you the peace of mind to know that your loved one is cared for in the years to come.