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Special Needs Planning

A special needs trust may be an option to protect against the unknowns. A person with special needs or other authorized individuals may be able to establish a special needs trust to ensure the individual with special needs is taken care of if he or she is unable to care for himself or herself and in order to help that individual remain qualified for certain government benefits. For example, a person living with a qualifying disability might be the beneficiary of a personal injury lawsuit or be the named beneficiary of a parent's IRA or other investment. A trustee (individual or corporate) would manage that person's assets for their sole benefit while making sure not to penalize or disqualify the beneficiary from their benefits. In order to maintain qualification for those disabilities or to preserve the potential qualification in the future for benefits, the special needs trust might be the appropriate estate planning tool.

On the other hand, a client may want to leave a portion or all of his or her estate to a child or loved one that is or may eventually receive government benefits. This is where the supplemental needs trust comes in. Instead of leaving it to that individual outright, the estate planning document could set up a supplemental needs trust for that individual's share. This type of trust can safeguard government benefits that the individual might be receiving by not putting the assets into that person's name outright.

Similarly, in this situation, a third-party trustee is designated to manage the trust assets and the individual with special needs is the beneficiary. The trustee is given discretion on when and how much to distribute from the trust. Because of this, it is important for the trustee to be someone who will correctly look after the beneficiary’s needs and keep up to speed on the individual's government benefits and requirements (if applicable). It could also be useful to designate a corporate trustee depending on the situation. As with all jobs, the corporate trustee would have to be delicately chosen so that the right company and person is chosen for the job and is up to the task of serving as the trustee of a special needs trusts.

Because the beneficiary of a special needs trust and supplemental needs trust does not have control over and access to the trust assets, the trust is not considered a resource for government benefits eligibility. If a person wants to leave money to a special needs family member who was on government benefits, an outright bequest could disqualify the family member from continuing to receive those benefits. By including provisions in the person’s trust to distribute the family member’s share into a supplemental needs trust, the trustee of the supplemental needs trust can continue to provide for that individual's care, not interfere with his or her government benefits, and not have a Medicaid payback provision wherein any assets remaining in the trust must be paid back to the state agency upon the death of the beneficiary.


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