You may have come across websites that offer to provide visitors with generic legal documents.  Sometimes for free.  They want you to believe that the law is something that you can take into your own hands when it comes to planning your estate; that all you have to do is fill in the empty fields and everything is settled.
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Parman & Easterday are members of the American Academy of Estate Planning Attorneys.

When I meet with clients who have family members with special needs, they are thrown when I mention there are two types of special needs trusts (SNTs)—the third party special needs trust and the first party or “self-settled” special needs trust.  Hopefully this discussion will answer some of your questions.
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Parman & Easterday are members of the American Academy of Estate Planning Attorneys.

Unfortunately every one of us has someone in our extended family or knows of another family that has a member with special needs. In the context of financial planning the term special needs applies to loved ones who cannot, for some reason, take care of themselves. The reasons are varied and include, for example, children born with Down’s syndrome; young people who have developed schizophrenia or some other severe mental illness; a person permanently incapacitated from an accident; or a senior family member with dementia. Each of these people and many others need daily assistance.

The individuals who need to consult with an attorney for special needs planning are the family members, especially parents, who want to provide for their special needs loved one through an inheritance. However, leaving money in the form of an inheritance or life insurance proceeds to a person with special needs generally will not improve their life; it likely will have a detrimental effect on their financial well-being.

Financial Considerations for Special Needs Individuals

Most people with special needs qualify for Supplemental Security Income (SSI) due to their disability. SSI is a federal program that provides financial support to individuals with disabilities. Special needs individuals also generally qualify for Medicaid which covers many medical costs. However, in order to qualify for Medicaid a person must have less than $2,000 in assets.

Special Needs in Estate Planning

It is easy to see that leaving a lump sum of money as an inheritance or life insurance proceeds to a person with special needs jeopardizes medical coverage through Medicaid. A person on SSI disability typically will not be eligible for private health insurance so any inheritance will immediately pay for medical bills that were previously covered by Medicaid. When the inheritance is exhausted the loved one must requalify for Medicaid.

Providing for a person with special needs, including a spouse, requires complex planning that is best done with the advice of a qualified attorney.

Larry Parman
Attorney at Law

Parman & Easterday are members of the American Academy of Estate Planning Attorneys.

If there is someone with special needs that relies on you, it is important that you understand that your estate plan will need particular consideration. For those that have a child or other relative that has special needs, you will need to become informed on Special Needs trusts.

In the case that someone is receiving federal assistance through Supplemental Security Income (SSI) due to being mentally or physically disabled, it is important that any inheritance that is left to them not disrupt these benefits or even worse, disqualify them.

For someone to qualify and continue to qualify for SSI, they cannot have more than $2,000 in non-exempt resources. If a disabled person receives an inheritance that exceeds their $2,000 limit, they will no longer qualify for federal assistance. Due to this limit on assets, one of the best ways to leave an inheritance to a special needs person is with a Special Needs trust.

Special Needs trusts are used to supplement living expense needs that exceed what is provided by the government through SSI. There are a few different types of trusts that are used for individuals with special needs – these include the first party trust, a pooled trust, or a third party trust. With all three of these trusts the person with special needs is named as the beneficiary.

With a first party trust, the assets belonging to the individual with special needs are held in trust. A third party trust will hold assets for someone such as a parent; these assets are meant to benefit the special needs individual. A pooled trust will hold assets for a number of individuals with special needs.

To create a trust for someone with special needs it is important to consult an experienced estate planning attorney. This trust will provide for the needs of the individual without jeopardizing their benefits, but it is important that it be structured in a way that will not disqualify that person from receiving available assistance.

Larry Parman
Attorney at Law

Parman & Easterday are members of the American Academy of Estate Planning Attorneys.

A Special Needs Trust is an Irrevocable Trust used to manage the funds of a family member with a mental or physical disability. If you have a loved one with a disability who relies upon you for financial help, you can use such a Trust to assure there are funds available for that family member’s care. This type of Trust may be unnecessary if your loved one can manage his or her own finances and does not need government aid. So, when is the best time to use a Special Needs Trust?

Underage Recipient

If your disabled loved one is a minor child, an Irrevocable Trust can provide funds for his or her care throughout childhood. This will ensure your child has proper medical and physical care.

Recipient Unable to Work

If your family member’s disability keeps him or her from working, you can use a Special Needs Trust to provide long term income for that individual. If funds are substantial, your Trust can even be a Lifetime Trust to cover your family member’s extra medical needs in his or her elderly years.

Cannot Manage Funds

If your special needs person cannot manage his or her own funds, a Trust allows you to appoint a reliable family member, friend or a bank’s trust department to act as Trustee and disburse funds as needed for your beneficiary’s regular and special needs.

Government Aid

Many people with disabilities that keep them from holding a job are eligible to receive Supplement Security income, Medicaid and housing assistance. If you leave a direct inheritance to such an individual, you will jeopardize his or her aid. A direct inheritance will be seen as income and government aid will be adjusted to reflect those funds.

A Special Needs Trust, however, includes provisions that allow for disbursement of funds without disqualifying your special needs person from receiving aid. In this fashion, the Trust will last longer, and supplement the aid funds with a little extra money for your loved one.

Larry Parman
Attorney at Law

Parman & Easterday are members of the American Academy of Estate Planning Attorneys.