The Importance of Planning with Special Needs Trusts

Special needs person in wheelchair

A third party Special Needs Trust (also called Supplemental Needs Trust) is a very important planning tool for families with special needs individuals. These types of trusts can drastically improve the quality of a special needs individual’s life by providing resources beyond basic government benefits, safeguarding assets from predators, and promoting desired opportunities and experiences.

Often, individuals with special needs are unable to generate sufficient income to provide the necessities of life. Because of such circumstances, every state, including Utah, provides needs-based government assistance in the form of Medicaid and Supplemental Security Income (“SSI”). However, to qualify for these programs, an individual must have less than $2,000 of countable assets. This limitation is not often a problem while the parents of a special needs child are living. However, the receipt of any significant inheritance upon the death of a parent (including from life insurance proceeds on a parent’s life) can cause benefit ineligibility, leading to a termination of Medicaid and SSI until the received inheritance is spent down to below the $2,000 threshold.

Such a situation is not ideal because it could lead to the most vulnerable among us being left to the mercy of the government once the inheritance is spent and gone. This is why special needs trusts are so important. A properly designed special needs trust can receive an inheritance and not interfere with Medicaid and SSI eligibility. Essentially, the amounts held in the special needs trust are not considered countable assets of the special needs child for purposes of government benefits. However, the funds inside the trust will still be available to be used on behalf of the special needs child for everything the government does not provide. Some examples of ways funds held by a special needs trust can be used include hair care, dental, vacations, electronics, supplemental home care, companionship, recreational and cultural experiences, and unreimbursed medical expenses. Essentially, the funds can be used for many of the things in life that make life enjoyable.

There are many decisions that parents need to make when designing a special needs trust for their child. For example, choosing the right trustee of a special needs trust who will act in your child’s best interest after you are gone. Sometimes the trustee chosen by the parents is a trusted family member, sometimes a family member and a professional work together as co-trustees, and other times a panel of individuals made up of family members and caregivers is most appropriate. Another example of an important decision would be determining which values and opportunities for your child do you want your trustee to promote with the trust funds. Maybe you want your child to participate in the Special Olympics, maybe you want him or her to have regular visits with family members who are living out of state, maybe you want your child to live as independently as possible in his or her own apartment. Each individual and family circumstance is different but a well thought out and drafted trust can address your unique situation and make all the difference in the life of your child if something ever happens to you.

This post was written by Elliot P. Smith, Esq. who is an estate planning attorney and certified public accountant with the law firm Pearson Butler, PLLC in South Jordan, Utah? Elliot is a nationally published author on the topic of ABLE Account laws dealing with special need planning.

Disclaimer: The information in this post is solely for information purposes and cannot be used as legal advice. Nothing herein shall create an attorney-client relationship. Contact an attorney to discuss your specific set of circumstances if you are in need of a special needs trust or other legal assistance.