Wednesday, December 26, 2018

There's No Limit on Assets Going into a Special Needs Trust


There’s no limit on the amount of cash or assets that may be put into a trust for a child with “special needs”, but setting up and administering a special needs trust (SNT) is no simple matter due to state and federal laws, which dictate a host of rules about:
  • how SNTs are created
  • how SNTs are funded
  • how SNTs are run
  • how SNTs end
With special needs planning being one of our practice areas at Geyer Law, we take a lot of time explaining to parents and grandparents how these rules work.  The purpose of a special needs trust is to allow a disabled beneficiary to benefit from funds while not disqualifying that beneficiary from receiving governmental benefits.  Funds in a special needs trust can be used to provide the beneficiary with services and things  not covered by government benefits programs.  These might include:
  • medical expenses
  • dental expenses
  • equipment
  • special dietary needs
  • insurance
  • education
  • recreation  and vacations
  • gifts for others
  • funeral arrangements
Three specific things that a SNT should NOT do include:
  • pay cash to the beneficiary
  • pay for food
  • pay for shelter
The reasoning behind these “no-nos” is that is that special needs trusts are designed to supplement, not replace the support by government programs such as Medicaid and Supplemental Security Income (SSI).

Third party special needs trust are formed with money or property belonging to someone other than the beneficiary. Often, at Geyer Law, we help clients create special needs trusts as part of their estate plan for the purpose of providing for the needs of a disabled child after they, the parents, have died, but occasionally, the funding for the trust comes from a direct inheritance or even from a settlement from a personal injury lawsuit.  In those two instances, the trust must be set up as a self-settled special needs trust because the funds belong to the disabled beneficiary, and the trust must include a payback provision to pay the state for care provided during that individual’s lifetime.

No, there is no limit on assets going into a special needs trust.  On the other hand, there seems to be no limit on the number of federal and state laws that must be navigated to make sure the beneficiary’s government benefits remain in place. Our job as estate planning attorneys is to help our clients understand and navigate these laws so that they achieve peace of mind.

- by Rebecca W. Geyer





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