By Andrew Deaver
Planning for the future of a child with intellectual or developmental disabilities (“IDD”) can be confusing, especially for overwhelmed parents and caregivers. But it is essential, as according to the National Library of Medicine, advances in health care have greatly increased the life expectancy of individuals with IDD. The possibility of these individuals outliving their parents or caregivers has become much more likely.
For this reason, the need for future planning has become increasingly important. Future planning can include housing, financial and legal planning, identification of primary caregivers, day-to-day care, medical management, and transportation.
Attorneys at AKC Law are experienced in assisting families with creating Special Needs Trusts (“SNTs”). An SNT allows a person with IDD to receive certain trust benefits without reducing their eligibility for public assistance disability benefits provided by Social Security, Supplemental Security Income, Medicare, or Medicaid. Funds from a SNT can go towards expenses that are not covered by government benefits and can improve your loved one’s quality of life. Things like :• Medical treatment that Medicaid doesn’t cover
• Personal care services
• Computer or entertainment equipment
• Travel and vacations
• Club membership
• Furniture and appliances
• Sporting goods and fitness equipment
• Education and vocational training
Generally, as long as there is no payout to the beneficiary in the way of cash, checks, investments, or retirement savings, the distributed funds won’t count as income.
There are two main types of special needs trusts: a first-party SNT and a third-party SNT.
A first-party SNT is funded with assets that already belong to the person with a disability. Some examples are a bank account, assets gifted or inherited, or lawsuit settlement funds. Generally, a first-party trust may only be funded with the assets of a person with IDD under age 65. When drafted properly, assets held in a first-party SNT do not count as assets of an individual for purposes of need-based disability benefits. However, this type of trust is also commonly referred to as a “payback trust” since the trust assets must be used to pay back the state for any Medicaid benefits the
individual received during his/her lifetime.
A third-party SNT is a trust that is funded with the assets of someone other than the person with a disability. Usually, a third-party SNT is created by parents, grandparents, or other family members who wish to give assets to a child with a disability, either during life or at death. Unlike the first-party trust, there is no payback required on the death of the beneficiary — remaining trust assets may pass on to contingent beneficiaries selected by the grantor.
An SNT is an essential tool to ensure the best quality of life and continued care for your loved one long after you are gone. It is important to work with an attorney who is knowledgeable about estate planning for families with a special needs child. Determining how a SNT should be drafted to meet the particular needs of your family requires a thorough knowledge of public benefits as well as applicable federal and state laws related to taxes and governing trusts and estates.
AKC Law has over 78 years of experience counseling individuals and families on estate planning needs. Andrew Deaver, a partner at the firm, is a member of the Academy of Special Needs Planners – an organization of professionals including attorneys, financial planners and trust officers who provide the highest quality service and advice to persons with special needs and to their families. To learn more about special needs trusts, contact Andy at [email protected].