Estate Planning for Families with Special Needs Children - Part Two

Supplemental Needs Trusts

If you are the person in Scenario 1 from Part 1 of this series (the parent or grandparent of a child with special needs), and you wish to provide your loved one with additional supplemental services or support beyond what is provided by needs-based benefit programs you may choose to set up a Supplemental Needs Trust during your lifetime.

A properly drafted Supplemental Needs Trust can be established during your lifetime either as a stand-alone trust, or within a Will. There are many factors that will help determine how the trust should be set up; a qualified special-needs planning attorney should review these with you. The financial and personal circumstances of both you and the beneficiary are important considerations.

One of the most attractive benefits of these kinds of trusts, at least currently, is that there is no payback provision required. This means that the trust will not have to pay back the cost of any Medicaid services provided to the beneficiary during his/her lifetime. This is one reason why it is important to evaluate the need for a special needs planning for children as soon as possible rather than waiting until a child with special needs receives an inheritance. Additionally, these kinds of trusts are currently not subject to any age or disability requirements.

A Note on Gifts to Siblings:

Every now and then I will get asked whether or not a parent or grandparent should give the assets intended for their special needs child to the sibling of the special needs child instead. Their goal is to avoid the cost and complexity of setting up and administering a supplemental needs trust. There are many problems with this sort of “planning.”

Giving the assets to the sibling via gift or an inheritance could end up exposing the assets to the creditors of the sibling, or to a divorce proceeding. Distributions made by the sibling to the child with special needs could also result in a loss of eligibility of certain governmental benefits, or unintended tax consequences. The sibling could become incapacitated and the funds may become unavailable for anyone else’s use as a result. Or, the sibling may end up misappropriating the funds.

If you have a child or grandchild with special needs, or you are currently receiving needs-based benefits and have received a large sum of money, please contact us to discuss how we may be of assistance. We can be reached at (203) 651-5521.