Special Planning for Special Needs Children
February 2010
Creating a Special Needs Trust can help provide for
a child's care but maximizing the benefit may require communication and
coordination
Special children require special planning. One of the
risks that a family with a special needs child may have is that a well-meaning
loved one could accidentally disqualify the child from receiving government
benefits.
Consider this example: Joe is 22 years old and has a birth defect that deprives
him of the ability to walk or have full use of his hands. He lives in subsidized
housing and receives a monthly $800 Supplemental Security Income (SSI) payment
from the government.
Joe also receives financial assistance from a Special Needs Trust (SNT) that his
parents created to help provide for his care and needs.
Joes Aunt Mary dies and, unbeknown to his parents, leaves Joe $60,000, which he
receives directly from her estate and deposits in his bank account. Her
thoughtful gesture ends up creating major problems for Joe, since the presence
of several thousand dollars in his bank account puts his eligibility for
continued assistance at risk.
Issues such as Joes can pose serious financial challenges for a special needs
family, and professionally guided planning and responses can help prevent it.
Strategies. Whether he knew it or not, Joe had a few options that would have
allowed him to benefit from Aunt Marys generosity without jeopardizing his
government assistance:
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First, the first-party Special Needs Trust that Joe's parents created should
include a government reimbursement or "payback" provision. If Joe transfers his
inheritance into the trust, his eligibility for government assistance should not
be disturbed.
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On a less prudent level, Joe could have spent all of the money during the
calendar month in which he received it, and his month-end bank balance would not
have been increased to the point that he would lose eligibility.
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Also, Joe could have purchased or invested in exempt resources, such as an
automobile or a home.
As for Aunt Mary, there are things that she could have done to prevent the
problems that Joe experienced.
If she had left the $60,000 to the Special Needs Trust created by Joe's parents,
there would have been no threat to his eligibility for certain services.
Also, a properly prepared Special Needs Trust should include provisions that
allow for the establishment of separate accounts. With proper coordination, Aunt
Mary could have designated different residual beneficiaries than those
identified in the Special Needs Trust.
A Special Needs Trust should also specifically state that no accounts will be
mutually maintained by individuals other than the trustors (in this case, Joes
parents), unless a donor has specifically mandated their inclusion.
Communication. If you have set up a Special Needs Trust for your child or plan
to do so in the future, it's important that you let close friends and relatives
know, so that those loved ones will know that any contributions they wish to
make should go into that Trust.
Adapted from the Daily Plan-It newsletter. Hoopes,
Adams & Alexander, PLC, is a Chandler, Arizona, law firm offering services to
Phoenix-area clients in the areas of estate planning, entity formation,
commercial and real estate transactions, and civil litigation. |
