Special Needs Planning

Families with special needs members have additional considerations. For example, parents usually want to plan so that they provide for all of their children equally. The special needs child, however, will typically have greater financial needs, and also may be reliant on government benefits for assistance. Planning to provide for the special needs child without jeopardizing eligibility for need-based benefits such as Medicaid or Social Security SSI is a primary estate planning concern for the family with a special needs child. A Supplemental Needs Trust (sometimes also referred to as a Third-Party Special Needs Trust) is a tool that is especially useful for these concerns.

A Supplemental Needs Trust can be a flexible instrument. It can be prepared so that it preserves current or potential government benefits. However, even if the special needs family member is not likely to use need-based government benefits, the Supplemental Needs Trust can also be used as protection from creditors and unwise investment or spending.

Some characteristics and benefits of a Supplemental Needs Trust include:

• The trust is funded by a third party, not with the assets of the special needs person. These trusts are often funded by parents, but they can also be structured to receive gifts and inheritances from grandparents and other relatives for the benefit of the special needs child.
• The creators of the trust decide the terms and conditions of the trust assets, such as who will receive the balance of the trust funds when the special needs family member passes.
• The trust can be either revocable (the creators of the trust can change or cancel the trust in the future) or irrevocable.
• A third party, the trustee, manages and invests the trust assets. The creators of the trust can name who will serve as the initial trustee and also who will serve as the successor trustee. The trustee can be the parents, another individual, or a professional trustee, such as a bank or trust company.
• The trustee is given complete discretion in making distributions for the benefit of the special needs child. To preserve government benefits that provide for the child’s basic shelter and food, the trustee is limited to distributions only for “supplemental” quality-of-life items that add to the benefits provided by the government.
• A trust “protector” can be appointed to direct and monitor the trustee’s actions, and even remove and replace a trustee.
• The trust eliminates the need for a probate court conservatorship.
• The trust coordinates government benefits and trust assets to provide for the special needs child over his or her lifetime, as circumstances change.
• The trust can avoid family conflicts by specifying which child inherits what assets, at what time, and for what reason.