If you are a parent of a special needs child you are likely focused on your child’s day-to-day needs and any of the challenges that may come along with those needs. You worry about your child’s future, but with so many things on your mind, you are probably thinking about, but may be putting off making plans for your child’s future. That being said, there is a lot of peace of mind that comes with proper planning, especially if you anticipate that your child will need assistance in one form or another for the rest of their life. But where do you start?
Common Questions About Special Needs Trusts
- How can we plan for the future when we do not know what benefits will be available in the future? What about the eligibility rules for those benefits?
- How can we plan for the future when we don’t know if any of the agencies current serving my child’s needs will be available over my child’s lifetime?
- What if we do not know who would be the best trustee to oversee the plans I make for my child?
- What if my child’s needs change over time?
Why consider a Special Needs Trust?
Special Needs Trusts can serve a variety of goals that are unique to people with special needs, including:
- Protecting eligibility for government benefits
- Proving for a desirable quality of life
- Establishing a framework for care and management of trust assets for the benefit of the person with special needs
- Allowing a parent or grandparent to express their desire for and goals behind the trust
- Protecting assets from creditors and predators
- Avoiding reliance on a sibling to provide for the special needs family-member
- Promotes privacy for the person with special needs
- Extending the life of assets to be able to benefit the special needs person for a longer period of time.
Types of Special Needs Trusts
The most common categories of Special Needs Trusts (SNTs) are:
- First Party Special Needs Trust (Self-settled or Medicaid Payback SNT) and
- Third Party Special Needs Trust.
A First Party Special Needs Trust is created for the sole benefit of the special needs beneficiary but is funded by assets belonging to the special needs beneficiary. A First Party SNT is a statutory trust that needs to be set up by a parent, grandparent, legal guardian or the court. This type of trust is most common when the beneficiary is receiving funds from a settlement, judgment, or probated estate where there is no pre-death special needs planning. A key characteristic of a First Party SNT is Medicaid payback upon death.
A Third Party Special Needs Trust is an estate planning special needs trust. A Third Party SNT is very flexible. It can be set up with multiple beneficiaries, can turn on and turn off, among many other options, and there is no estate recovery upon death.
Most people are looking to set up a Third Party SNT as part of an overall estate plan.
Choosing a Trustee for a Special Needs Trust
Choosing a trustee can be difficult. Most families choose the child’s parents to serve as the initial trustee or trustees. But what happens when the parents are no longer available to serve as trustee? Who do you pick next? A sibling? Another family member? An institutional trustee? There are options, but when it comes to special needs planning there can be aspects of overseeing the trust that are unique to the special needs context. For example, if the beneficiary requires an aide or assisted living setting, someone needs to ensure that the beneficiary is being well-cared for and is not being abused in any way. A SNT trustee, therefore, has to wear many hats.
Here are some characteristics that are key for any Special Needs Trustee to have:
- Ability to understand what is in the best interest of the special needs beneficiary;
- Keep up with public benefits and changes in the law, including understanding when tapping into benefits is not in the beneficiary’s best interests;
- Can wisely, responsibly invest trust assets and conform to all statutory fiduciary requirements;
- Understands taxes;
- Keeps really, really good books;
- Provides advocacy and prevents abuse; and,
- Has to outlive the beneficiary (!).
All of these characteristics can be distilled into 3 Categories of Duties: Accountability; Advocacy; Financial. So how do you find the perfect trustee? There is no “perfect” trustee. No one exists who can meet each of these characteristics in their own right. There are, however, different ways to set up a special needs trust depending on the needs implicated and the goals to be met so that you can ensure that your plans for your child provide for accountability, address advocacy needs, and promote financial stability.
If you are interested in learning more about setting up a special needs trust for your loved one, call Stone & Sullivan, LLC at (912)999-8255 to set up a meeting to discuss your needs.