As
the parent of a child with
special needs, it has been our experience that you will do whatever is
necessary
to care for your child. As unnerving as it may be to think, what
happens when
you are no longer able to provide for your child? At
your death, how do you continue to provide the same level
of care that will allow your son or daughter to continue to live as
fulfilling
of a life as possible?
The Special Needs Trust (SNT) is arguably the most important planning
tool
available to families with children with special needs. Although many
of the
families we serve each year come into our office having heard of
special needs
trusts, they are often unaware of what these trusts really accomplish,
more
importantly, what they protect.
Before I get into this topic, know
that I am not an attorney and I am not compensated for drafting special
needs
trusts. Our expertise is purely driven from the interaction with
hundreds of
special needs families each year and from our ongoing work with attorney's to help these families prepare their
plans. You
should always consult with an attorney to have your legal documents
drafted and
you should consult specifically with an attorney that has experience in
drafting special needs trusts.
We’ll discuss what a special needs trust is specifically,
but let’s briefly discuss what a trust is without the legal jargon. As
simple a
definition of a trust as I've found is: a trust is a legal device
used to
set aside money or property of one person for the benefit of one or
more
persons or organizations (as
defined at http://www.mscf.org/). In other
words, a
trust is simply a legal document that is drafted to own and ultimately
distribute assets from one entity to another. Think of it as an empty
box that
can hold ownership of most assets (including investments like stocks
and bonds,
cash, real estate, insurance or collectibles) that when properly
drafted allows
the grantor (person setting up the trust) to circumvent probate and
have their
assets distributed as
they would intend.
Trusts can be used for various reasons such as to aid in tax savings,
divide a
family’s estate among children, carry out a charitable plan, or in this
case, provide
support for an individual with special needs. SNT's can be created in
various
forms, but often they are implemented as a tool for parents to leave
assets at
their death that will be used to provide ongoing support for their
child with
special needs.
A
SNT is a tool used to hold assets for the purpose of
supplementing governmental benefits for an individual with special
needs. The
key is that these trusts supplement yet do not supplant benefits
provided
through social security and the state. Currently,
federal guidelines dictate that an individual
with special needs over the age of 18 has to
follow strict asset guidelines in order to qualify and maintain these
vital
benefits. To remain eligible for social
security income (key: SSI, not SSDI) the individual cannot maintain
assets in
excess of $2,000. Note: $2,000 is the federal guideline, but
states can
take a more stringent stance - Missouri for example sets the guideline
at just
$1,000. Understanding this stringent
limitation is placed on individuals in regards to the amount of assets
they can
own leaves families with the burden of finding a way to leave behind
funds to supplement
their child's future needs without making them ineligible for benefits.
In
preparing their estate plan, your
neighbor quite likely can
simply leave assets divided among their children or beneficiaries
directly without
a limitation on how much they can leave them. This
is also true for your non-disabled children (although
trusts can be very beneficial when leaving assets to any child or
charity). But, for your son or
daughter with special needs, you simply cannot leave money directly to
them at
your death without the reasonable expectation that they will become
ineligible
for benefits, at least temporarily.
At a minimum your son or daughter could be forced to spend down
the
assets received below the $2,000 threshold and then reapply for
benefits once
they have done so. In some cases ‘after
the fact’ trusts can be developed, but they will likely require a
Medicaid
payback clause.
Let’s
assume an example where a disabled individual over the
age of 18 is receiving the full social security monthly cash benefit
amount. Further, let’s assume they live in
some
form of an independent living residence.
In most states, the individual is entitled to approximately $675
per
month. This income is meant to provide food and shelter and would
likely be
recouped by any living facility your child may choose to live in during
adulthood. Of this monthly cash
benefit, the individual is typically entitled to keep a small stipend
for additional
expenses (often times this is around only $30!). Now think of all the
'things'
your son or daughter needs and enjoys each month that are necessary to
provide
a minimum level of comfort and a certain quality of life: CD's and
DVD's,
computer games, going to the movies or out to eat with friends,
vacations with
siblings, etc. Don’t forget even more
essential needs such as asthma medication and toiletries. This is what
a
special needs trust accomplishes: it allows monies to be set aside
specifically
to provide these supplemental resources, while not disrupting the
critical state
benefits your child may well be dependent on. No
parent can expect the quality of life they would wish for
their son or daughter in perpetuity with a budget of $30/month.
We didn't even
discuss the most important benefit of social security and state
benefits in
most cases - medical coverage. To some, the monthly SSI income
discussed above
is critical, while to others it is not overly significant. As many of
our
families have unfortunately experienced, medical coverage can be
critical to
any family regardless of their financial resources.
This further confirms the importance of leaving assets
behind in a special needs trust as opposed
to leaving
it directly to the individual as this may cause not only a loss of the
monthly
cash benefit, but, more importantly, a loss of vital medical benefits.
Whether your child is over the age of 18 and already receiving state
provided
benefits, or your child is under the age of 18 and may someday be
dependent on
these benefits, a special needs trust is the core of a comprehensive
plan to ensure
quality of care for your child. Critical
state benefits such as social security and Medicaid will provide a base
of care
for your loved one, but a family can help supplement the individual’s
needs by
using a special needs trust.
You may contact the
author at hburch@specialneedskc.com. For more information on special needs
trusts and other planning tools go to The Special Needs Planning
Centers
website at www.specialneedskc.com
.
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