All parents experience the feeling of wanting to do everything they can for their child, and parents of children who have special needs are no different. But while the parents (and perhaps siblings and other relatives) will be there for the child's early years, what about when the child reaches adulthood? What about when one or both parents die or are no longer able to take care of the child? Although there is no failsafe plan, one very good estate planning option is a special needs trust (also called a supplemental needs trust).
A special needs trust is designed to supplement the various governmental benefits that a person with special needs is entitled to. The key to the plan is that it is based on the Social Security Administration's Supplemental Security Income (SSI) benefits. SSI pays for basics such as food, clothing and shelter, and makes the recipient eligible for Medicaid, food stamps, and often many local services as well. But in order to qualify for SSI, the person must have less than $2000 in assets. By creating a special needs trust, the assets in the trust can be used to benefit the person with special needs, but those assets don't count against the $2000 SSI eligibility minimum.
Under a special needs trust, the assets in the trust (which can include money, stocks, or even a home) are controlled entirely by a trustee, for the benefit of the person with special needs (the beneficiary). The trustee might be a member of the family, a trusted friend or clergy member, or a bank. (If the trustee is a bank, it would take a fee from the funds in the trust to act as administrator).
No matter who plays the role, it is the trustee who has full control of the trust's assets. That way, the government will not view the assets as invalidating the beneficiary's eligibility for governmental assistance. With the basics of food and shelter taken care of, the trustee is free to spend the trust's assets on anything from video games to airplane tickets to improve the quality of life of the beneficiary.
One of the principal advantages of the trust is that it continues to operate long after the person who created it has died. This allows a parent or grandparent to know that long after he or she is gone, the long-term needs of the family member will be taken care of.
Special needs trusts are often set up to receive proceeds from a legal judgment or settlement. They can also be funded with assets from a life insurance policy, so they're not out-of-reach even for those who aren't particularly wealthy. If you or someone you know is caring for a child with special needs, talk to an experienced estate planning attorney.
From our law offices in Hackensack and Manhattan, Kirsch Gartenberg Howard LLP has served individuals and businesses across northern New Jersey, including Bergen County, Essex County, Union County, Middlesex County and Passaic County, and the five boroughs of New York City since 1984.
