Parents or family members often need to provide for future care and support for loved ones who have mental or physical disabilities. In these cases, Park Gold first plans for the parents/family members own disability and/or transitioning; while at the same time, providing a Special Needs Trust or “Spendthirft Trust”* as well as a Life Care Plan for the disabled, which details the disabled needs and anticipated expenses upon the parent’s or family member’s death.
The overarching purpose of this type of trust planning is to provide for a loved one with a disability without jeopardizing the disabled’s eligibility for government benefits while simultaneously, enabling the individual to enjoy income and principal in the trust. Eligible public benefits can include, SSI, Medicaid, Section 8 Housing, DDD benefits and other federal or state-sponsored assistance programs. Frankly speaking, it makes no sense to leave funds or property to a loved one if it means they will be ineligible for government help until it’s all used up.
Starting the conversation, parents/family members should consider:
- Who will be responsible for the personal care of the loved one after they die? Parents should always start the conversation amongst themselves and then broaden the conversation to other children, family members, and close friends they are considering for the tasks.
- Consider the affect the special needs trust will have on other children. Often times parents have to provide more if not all assets to child or loved one with the disability leaving the other children with a lesser share.
- How can one best leave money for the loved ones use?
- How will any money left behind be treated when determining eligibility for government benefits?
Next Steps:
- If a minor, choose a personal guardian to be responsible for the loved one until they become a legal adult at the age of 18.
- Select a financial guardian who will manage the money they leave for their loved ones during the loved one’s lifetime.
The key here is an independent trusteed can spend trust income or principal. As the loved one will not legally own the trust assets, those assets do not count when determining eligibility. Under U.S. Social Security Administration (SSA) guidelines, the property in a special needs trust doesn’t affect eligibility for Social Security assistance only if the benecificary CANNOT:
Basically, the individual must have no rights to demand and receive money from the trust income or principal. Nor can the individual terminate the trust and take all the money in it. The trustee power to spend money on behalf of the beneficiary must be for carefully defined needs not met by government aid.
Typical expenditures or disbursements made by a Special Needs Trust include the following:
- Purchase of a home for the disabled.
- Pay for services that Medicaid does not cover, including home care and such items as wheelchairs, handicap accessible vans and mechanical beds.
- Pay for a personal attendant should that be required.
- Pay for recreational and cultural experiences.
- Designing the Plan: Our team helps you think through what sort of life best suits your loved one with a disability. For example, are they able to work, would they like to work, examining hobbies, living arrangements, communities and individuals they want to maintain relationships with, transportation needs and other factors.
- Examining Resources: Our team guides you thru the public benefits, such as SSI, Social Security Disability Insurance, Medicare, Medicaid, and the various waivers that may be available to your loved ones with a disability. Education is key here as to how apply for these benefits and how their eligibility for and use of said benefits will change during their lifetime.
- Drafting the Lifecare Plan: Our team has processed the goals for the adult life and which benefits apply or will apply. Here we determine, how much of your family member’s adult life can be funded through these pubic programs and how the programs work together. Park Gold also educates you on the supplemental needs that your loved one and your family will need to cover.
If there are insufficient funds available, parents may consider buying a life insurance policy. With one type of policy, upon the death of the second parent, the insurance proceeds are paid to the Special Needs Trust for the care of the person with special needs.
Things to consider when selecting a trustee for a child with disabilities
Selection of a trustee will often determine whether or not the trust succeeds in meeting the parent’s objectives. Factors parents/family members should consider:
- Trustee must be attentive to the beneficiary’s situation
- Discerning what is needed and providing for those needs to the fullest possible extent
- The trustee must stay in close contact with eh beneficiary – it is essential that the trustee and the individual get along
- Trustee should be savvy to deal with various institutions varying from hospitals to banks to case providers to government agencies.
While family members often want to serve as trustee, they typically don’t possess all of the necessary qualifications. For that reason, it is strongly recommended that families retain a professional trustee to oversee the Special Needs Trust with a family member named as co-trustee.
If a family selects a professional trustee from a bank, they should be sure that the bank has a trust department with an excellent track records for managing money. If a family chooses an attorney to serve as the professional trustee, they should be certain that he or she has a good track record in managing trust money, or that he or she will arrange to hire a professional money manager to oversee trust investments. Families should be aware that a trustee’s annual fees typically range from 1% to 1.5% of the trust assets. Theses annual fees are a very worthwhile investment toward the preservation of the security and quality of life of a child with disabilities.
Trust accountings are required. The Social Security Administration requires an annual accounting of the expenditure of funds in a Special Needs Trust. This accounting is intended to ensure that trust funds have not been mishandled and serves to protect the person with special needs and any other beneficiaries of the trust. Because the accounting work is fairly technical and must adhere to the rules of the Principal and Income Act, it is best handled by an accountant, who can be hired by the trustee.
A special needs trustee must have some familiarity with SSI. The Supplemental Security Income (SSI) federal program is a minimum monthly cash payment for the aged, blind or disabled. To qualify for SSI, a special needs individual must meet specific SSI definitions of disability or blindness. SSI eligibility also is “needs based,” with a limit on income and assets. SSI should not be confused with other Social Security benefits, such as retirement, survivor, dependent or other disability benefits. SSI payments are dedicated to paying for the food and shelter of a person with a disability.
Excerpt from Beyond Counsel, Thomas D. Begley, Jr. for the Practical Planning System an Estate Planning “Pooled” Special Needs Trusts
A pooled special needs trust is a group trust in which families pool their money together for their loved ones. These are generally run by nonprofits that administer the trust and provide trustees. (This is something we can work with the Answer, Inc on being a trustee for pooled trusts)
Letter of Intent
Parents should write a Letter of Intent laying out their wishes for the child’s care. The letter helps ensure that those responsible for the loved one’s care actually see them as a person, rather than a number, statistic or faceless subject in a legal document. It is also a vital document for the trustee, providing him or her with a greater understanding of the child, and ensuring that the family’s specific wishes, goals and expectations can be carried out.
Letter of Intent should detail the following:
- Unique personality traits.
- Medical history and special needs.
- Special education, past and present.
- Treatment, therapy and daily care needs.
- Favorite foods and clothing.
- Friends, co-workers and family members – anyone who is close to the child.
- Favorite recreational activities and sports.
- Past vacations and those he or she hopes to take in the future.
Spendthrift Trust: A trustee who is not the beneficiary handles the property and distributes it to the beneficiary as the trust directs.
