Under 18 years of age
Five Frequently Asked Questions:
- Who would benefit from a special needs trust?
A disabled child or a child who may be considered disabled as an adult:
- Whether receiving means tested government benefits or not at the time;
- The Social Security Act definition of disability pursuant to 42 U.S.C. section 1382 c(a)(3) for a person under 18 is:
“medically determinable physical or mental impairment that causes marked and severe functional limitations and can be expected to last for a continuous period of not less than 12 months
Examples- Autism, cerebral palsy, head or spinal cord injury, severe epilepsy, developmentally disabled, blindness, deafness etc.
- At what point do you need a special needs trust?
From the time the child is diagnosed with a physical or mental disability that would cause them to be disabled pursuant to the above definition or from the time that you believe the child may be disabled but have not yet received a diagnosis/prognosis.
If you are doing your estate planning- Wills/Trusts you should consider whether any of your beneficiaries or heirs are disabled according to the above definition and may be receiving or eligible in the future for government benefits such as SSI and/or Medicaid.
- How does a special needs trust protect a person who has special needs?
A special needs trust allows the grantor (usually a parent of grandparent) to establish a trust either during their lives (inter vivos trust) or upon their death (a testamentary trust) which is funded with the grantor’s money and/or assets that will allow the beneficiary (disabled child) to continue to receive or be eligible for means tested government benefits such as SSI, Medicaid and DDD services while having the trust assets available to supplement the government benefits.
If the special needs trust is properly written and implemented, the government won’t consider the trust assets as a disqualifying resource/asset of the disabled child, thereby allowing the child to continue to receive or continue eligibility for a future application for means tested government benefits. The special needs trust can then be used for other expenditures to enhance the disabled individuals needs and quality of life.
- On what can the special needs trust assets be spent or used?
- A trustee of a special needs trust must be very careful in how they spend the money within a special needs trust so as not to jeopardize government benefits through the trust expenditures. A trustee should seek legal or financial guidance prior to making distributions until they get a good idea of what is permissible and what is not. Examples of expenditures that can safely be made from the trust for the benefit of the disabled child would be: Electronics-computer, cell phone, tablet, music, education, recreational activities, books, vacations.
However, keep in mind that the expenditures should not be made directly to the beneficiary. Rather, they should be made to the third party vendor or provider on behalf of the beneficiary.
- What type of qualities should one consider when choosing a trustee for a special needs trust?
Selecting a trustee for a special needs trust should be done with great care. The trustee should be trust worthy, intelligent, good with money, have good judgment and be willing to seek guidance from professionals such as attorneys, accountants and/or financial advisors. The trustee must realize the importance of the terms of the trust and the purpose of the trust which is to not disqualify the disabled beneficiary from receiving means tested government benefits for which he/she is currently receiving or may be eligible for in the future. A trustee can be a family member, trusted advisor, professional or institution such as a bank or trust company. Trustees are entitled to compensation from trust assets for performing their fiduciary duties.