By: Steve Worrall, Marietta GA special needs attorney
As a Marietta special needs attorney, I’m often asked, “What exactly is a Special Needs Trust?”
For starters, a special needs trust is a legal entity created to hold assets of a person with a mental or physical disability. The trust names a trustee whose job is to manage the assets and distribute them according to the provisions of the trust. There are specific limitations on the way assets can be distributed so that they do not disqualify the beneficiary from eligibility for government programs.
There are two primary types of special needs trusts. They are:
Self Settled Special Needs Trusts
In a self-settled special needs trust the assets in the trust belong to the beneficiary. For example, if the person becomes disabled due to the negligence of a doctor or car accident, it is possible that the beneficiary received a settlement as a result of litigation. In this case, a self-settled special needs trust would be created for the beneficiary to receive and hold the settlement funds in order to preserve government benefits.
Third Party Special Needs Trusts
A third party special needs trust is created by a third party with assets that belong to the third party. For example, the parents of a child born with Down syndrome or autism might create a special needs trust for their child as a part of their overall estate plan. In the case of a third party special needs trust, family members may make lifetime gifts to the child.
Distributions for Special Needs Trusts
In order to preserve government benefits, it is important to direct the trustee not to pay for services that are provided by a government agency. If done correctly, the assets in the special needs trust will not be counted as a resource. The trust must authorize distributions only for special or supplemental needs. Some examples of this might include dental care, specialized therapy, and services of a caregiver. Improper distributions of a special needs trust can cause a loss of government services, so it is critical that the trust is set up and then managed properly.
Who Should Create a Special Needs Trust?
Not all Georgia estate planning attorneys have the training, expertise or knowledge to create a special needs trust. You should consult with an attorney who is experienced in creating these trusts and who knows how to properly advise trustees.
For families with special needs individuals, ensuring the care for their loved ones once the caretakers are gone is of the utmost priority. The loss of specialized care and Medicaid or SSI benefits is a very real danger if proper special needs planning is not put in place, which is why Atlanta special needs lawyers often share the benefits of special needs planning involving Special Needs Trusts.
What is a Special Needs Trust?
Since even a small amount of cash assets can disqualify special needs individuals from the care and assistance they need, it is important to not let these assets pass directly to them upon your passing. A Special Needs Trust is the best way to ensure your special needs loved one keeps their care and assistance while also benefiting from the legacy you leave behind. Atlanta special needs lawyers design these Trusts in such a way that the assets in it do not belong to your special needs beneficiary; instead, they are owned by the Trust and managed by a Trustee of your choosing who will direct the assets to be used for the benefit of your special needs loved one. Medicaid and SSI will ignore the assets in the Special Needs Trust as they are not directly owned by your special needs loved one.
How may the assets in a Special Needs Trust be spent?
Assets in a Special Needs Trust can be spent in a number of ways which benefit the special needs individual. These include education, recreation, vacations, home improvement, and certain out-of-pocket medical expenses. These expenses are considered “non-countable” by Medicaid and SSI since they do not count as the special needs individual’s personal assets. Atlanta special needs attorneys caution that assets in a Special Needs Trust may not be given directly to the special needs individual, as this will oftentimes disqualify them from receiving state assistance.
What if I don’t have a Trustee or I’m not leaving behind a large sum of money?
In cases where a suitable Trustee cannot be chosen or a small or moderate sum of money is being left behind, Atlanta special needs lawyers often direct their clients towards Pooled Trusts. Pooled Trusts are typically run by non-profits which manage the assets for special needs individuals. The non-profit will assign a Trustee who is responsible for managing the assets on behalf of the special needs individual; the benefit of such an arrangement is that the Trustee and the non-profit are both heavily involved in the special needs community and understand the care and compassion needed to look after your special needs loved one. While there are fees and different types of services attached to Pooled Trusts, they are often a good alternative to an individual Special Needs Trust in certain situations.
If you have any questions about how a Special Needs Trust can benefit you and your loved ones, please contact us at 770.425.6060 to schedule a consultation.