Special Needs Trusts

Special Needs Trusts Attorneys:  How They Can Help

special needs trusts attorneyAre  you a caregiver for someone who is disabled? Have you made arrangements for the care of your loved one after your death or if you become disabled? Who will pay for their care?  The Special Needs Trust is a legal entity that allows you to pre-fund and setup the care for someone who is disabled.

Owning a house, a car, furnishings, and normal personal effects does not affect eligibility for SSI or Medicaid. But other assets, including cash in the bank, does disqualify your loved one from benefits. For example, if you leave your loved one $10,000 in cash, that gift would disqualify your loved one from receiving SSI or Medicaid. The answer to this problem is a Special Needs Trust. The assets and property you leave to your disabled loved one become an asset of the Trust, which will be administered to benefit the disabled person.  In this way, they can continue to receive their social security and Medicaid benefits.

A Special Needs Trust is a flexible plan that helps meet immediate needs and future needs of a disabled persons. This kind of trust will be customized to address the individual needs of each family faced with the task of securing a disabled loved one’s future. A Special Needs Trust can allow the disabled person to become and remain eligible for government benefits like Medicaid and Supplemental Security Income, which often serve as significant sources of funding for their special needs.

The person serving as trustee of the special needs trust can usually pay for anything on behalf of the person with special needs, as long as it does not violate the terms of the trust.  However, payments for food and shelter may reduce the amount of SSI paid to the disabled person. It’s common for the trustee to pay for a broad variety of services provided to the disabled person, including travel, education, caregiving, or medical services not provided by Medicaid.

Funding a Virginia Special Needs Trust

You can create a Special Needs Trust right now, or you can specify that one be created by your will after your death. It is usually advisable to create your trust now, but that is a decision you can make in consultation with your estate planning attorney.  If the money and assets in the special needs trust are “self-settled”— meaning they come from the disabled person’s  own assets—federal law requires that the trust must reimburse Medicaid when the disabled person dies, using the property that remains in the special needs trust. After this “payback” requirement is fulfilled, the descendants of the disabled person will then share in the remaining trust property. To qualify for this type of special needs trust, the disabled person must be under age 65 at the time the trust is created, and must be legally determined “disabled” under the Social Security Act.

A special needs trust can also get its assets and funding from a third-party.  When a the assets used to fund the special needs trust don’t come from the disabled person, then there is no “payback” requirement. This makes it very important that the assets from this type of trust are never commingled with the assets of self-settled trust, which would make it subject to the payback requirement. There is no age limitation or specific disability requirement, because third-party special needs trusts are not subject to the same law as self-settled trusts.

Who Manages a Special Needs Trust?

Special Needs Trusts are usually managed by a professional trustee like a bank or trust company. You might think that the parents or guardians of the beneficiary would be sensible people to do this management task, but the law in some jurisdictions specifically prevents this.  The reason is that, in the case of the death of the disabled person, those family members would be the beneficiaries of assets in the trust.  So they have a sort of conflict of interest — they’d get more money if they spend less on the disabled person. Using a corporate trustee avoids this concern and also ensures that the management of the special needs trust will not be interrupted by the incapacity or death of individuals who might otherwise serve as trustees.

Most corporate fiduciaries charge an annual fee of at least 1% of the value of the trust that they manage. This comprehensive fee covers numerous services, including investment advice, tax reporting, and bookkeeping. If the trust principal is relatively modest, however, it may not be cost-effective to use a corporate trustee in the context of a privately administered special needs trust.

Special Needs Trusts Attorneys in Newport News, Yorktown, Hampton, Virginia

We can help you decide whether a special needs trust will work for your situation, and initial consultations are completely free. As an Estate Planning Attorney located in Yorktown, Virginia, I serve clients anywhere on the peninsula. Contact me today for a free consultation on your special needs trust or other estate planning issue.