As experienced and knowledgeable special needs attorneys, we address all of the legal needs of families that have a loved one with a disability. Our goal is to help you plan for the future and security of your special loved one with a disability. Have you ever wondered who will take care of and provide for your child with special needs after you are gone? How do you pass an inheritance on to your special needs loved one (when he or she cannot have more than $2,000.00) without effecting their governmental benefits? For many parents with special needs children, whether the children are minors or adults, these questions linger in the back of their minds. To ensure that governmental benefits (such as Medicaid/AHCCCS/ALTCS or SSI) are never altered, diminished or destroyed, it is imperative that you establish Special Needs Planning — including a supplemental care trust (sometimes referred to as a special needs trust) — through the experienced lawyers.
Estate planning is always important to do, however, when one of our beneficiaries is a special needs loved one, the planning becomes critical. When a parent leaves an inheritance over $2,000 to an individual with special needs, then that inheritance is actually a gift to the government because it eliminates that child’s qualification for government benefits and may in fact, in the end, not really help improve the quality of that child’s life. Many parents often mistakenly think that the only reliable method to protect a special needs loved one is to disinherit them. They believe, or are counseled, that leaving their inheritance to another child or individual who will morally take care of their special needs loved one solves the problem. In most cases, however, this only makes it worse. The best option is to provide for the disabled child via a supplemental care trust (also known as a special needs trust).
What if a disabled individual receives an inheritance from someone who failed to plan for their special needs, or receives a lawsuit settlement that causes them to lose means-based public benefits such as SSI, Medicaid/AHCCCS/ALTCS? Is there a way to benefit from the new found wealth and still maintain such benefits? Yes, if the disabled individual is under the age of 65, that individual may transfer their assets into a Special Needs Trust established pursuant to 42 USC 1396p(d)(4)(a). We routinely draft such trusts and advise trustees on appropriate administration of such trusts to ensure disabled beneficiaries obtain maximum use of trust assets and maintain necessary public benefits.
What is a supplemental care trust (third party non-grantor trust)?
A supplemental care trust (sometimes also referred to as a special needs trust) is created and funded with the assets of a third party (not the disabled individual) for the benefit of a disabled beneficiary. Most frequently parents will in their estate plan provide that upon their death(s) a portion of their estate will be held in supplemental care trust for the benefit of a disabled child. The parent can then designate a Trustee to manage the trust assets, the purposes for which the trust assets may be used, and ultimately to whom the trust assets shall be distributed should the disabled beneficiary die before the trust assets are exhausted for his/her benefit. There is no government pay-back requirement in a supplemental care trust (third party non-grantor trust)!
This type of trust will allow the special needs individual to maintain government benefits and to use the inheritance for his or her supplemental needs. This trust is the perfect solution and the only reliable method to make sure that your inheritance benefits your child with special needs. If properly drafted, this trust will specify that funds from the Trust only supplement and do not replace the government benefits. While government agencies recognize these trusts, there are strict rules and it is critical that you work with an experienced special needs attorney to draft the Trust. One wrong word or phrase can make the difference between an inheritance that benefits your child and one that causes your child to lose the many services, assistance and benefits available.
What is a Special Needs Trust established under 42 USC 1396p(d)(4)(a) (first party grantor trust)?
A disabled individual under the age 65 may transfer his/her own assets into a Special Needs Trust established under 42 USC 1396p(d)(4)(a) so that those assets will not be considered as an available/countable resource that would otherwise disqualify him/her from means-based public benefits such as SSI, Medicaid, and AHCCCS/ALTCS. A Special Needs Trust will allow a disabled individual to continue to qualify for public benefits if they receive settlement monies and/or inheritance. At the same time, the Trust assets may be used to supplement the individual’s special needs above and beyond those being provided for by public benefits and/or other means.
Under federal law, very strict requirements must be met to properly establish a Special Needs Trust: (1) the beneficiary must be under the age of 65 when the trust is established; (2) the beneficiary must be “disabled” according to Social Security criteria; (3) the trust must be established through the actions of the beneficiary’s parent, grandparent, guardian, or a court; and (4) the trust must provide that, upon termination of the trust, the state is reimbursed for all of the Medicaid benefits it paid to, or for the benefit of, the beneficiary (known as the “pay-back” provision). Once established, the Trustee must exercise extreme caution in making distributions in a manner that will not reduce and/or disqualify the beneficiary from public benefits; certain distributions will result in a reduction and/or total loss of certain public benefits. The rules related to special needs trust distributions are very complex and are dependent on the various public benefits the beneficiary receives. We strongly advise that Trustees of special needs trusts seek the advice of counsel to ensure you do not disqualify the very benefits you created the Trust to protect!