Parents with disabled or incapacitated children often worry about how their children will manage when they are no longer here to protect and support them. Siblings of such children often also worry that the financial and emotional burden of taking care of their disabled sibling will be left to them. Parents often want to leave all of the estate assets to the sibling who promises to care for their sibling, or, a disproportionate share of the estate assets to the disabled or incapacitated child. We have learned the hard way that this often doesn’t work the way either of the parties planned. We have seen divorces, bankruptcies and outright greed leave disabled or incapacitated siblings literally out in the cold (homeless). Leaving money outright to a disabled incapacitated child or adult who is receiving “means-tested” government benefits, like Social Security Supplemental Income (SSI) or Medicaid, could make them ineligible for these programs. Also a bad result. The solution is a Special Needs Trust to protect your disabled or incapacitated child. These trusts should be established before the child turns 18 in preparation for the future.
The Special Needs Trust (“SNT”) provides financial support for a disabled or incapacitated child (or adult), but the SNT owns the assets, not the individual. Therefore, the assets are excluded from a “means test” for SSI and Medicaid. But the funds in the trust can be used to “supplement” or enhance quality of life, such as providing a cell phone, a computer or other electronic equipment or rent an apartment or a private room in a group living facility. The SNT is a way of making sure that a vulnerable family member receives the money and other relatives, such as a sibling, don’t have the financial burden.
Specific provisions are included in SNTs created for individuals with a mental or physical disability so severe they cannot work and require ongoing support from governmental agencies. A disabled person who does not qualify for federal benefits and works, usually isn’t eligible to receive “means tested” government support and the provisions in the SNT will be different than for the child who is eligible for SSI or Medicaid.
Either version of the SNT requires a trustee and successor trustee to be responsible for managing the trust and distributing assets. The beneficiary may not have the ability to direct distributions from the trust. The language of the trust must state explicitly the trustee has sole discretion in making distributions. Using a Special Needs Trust can protect your disabled child and ensure they have a quality of life for years to come. If you would like to learn more about SNTs, please contact our office.