How to Set Up a Special Needs Trust in Four Steps

Are you the primary caregiver for someone with a disability? Are you the legal guardian of someone who needs ongoing long-term medical care? Are you concerned about accessibility to important things like housing, insurance, and independence? Of course you are! Setting up a Special Needs Trust is a vital part of estate planning when you are responsible for someone with a disability. Like any other type of trust, Special Needs Trusts require the knowledge of a professional to create. Unlike other types of trusts, they are set up for the most vulnerable people and need to be handled with special care.

In order for an adult with disabilities to qualify for local, state and federal governmental benefits, he or she has to basically be “poor as a church mouse”. If you want to leave an inheritance to take care of this individual, that inheritance will mess up his or her status a church mouse. You are allowed to put that inheritance into a Special Needs Trust for that individual. Since your loved one has absolutely no control over how the Special Needs Trust is spent, his or her governmental benefits will not be jeopardized.

Here’s what you need to do to set up a Special Needs Trust:

1. Understand what a Special Needs Trust is. It’s an account that can be used to pay for living and health care expenses for someone who has a disability for which he or she receives governmental benefits. A Special Needs Trust can be used to pay for things like:

• Medical expenses
• Entertainment and recreation
• Home furnishings and maintenance
• Clothing
• Tuition and other education-related expenses

There are 2 types of Special Needs Trusts. Self-settled trusts use the beneficiary’s own assets. Third-party (or supplement care) trusts are set up by one person for the benefit of another person. Either type needs a person, called a trustee, other than the beneficiary to be responsible for the management of the trust. The specific responsibilities of a trustee will depend on the specific provisions written into the trust and state guidelines. Like any other estate planning document, a Special Needs Trust is written specifically for the individual and his/her circumstances. The most common way that a Special Needs Trust is set up is to be funded with an inheritance.

2. Gather basic information. Since a Special Needs Trust is used if your loved one receives governmental benefits, you should bring the appropriate paperwork for all sources of income with you when you meet with your attorney. Income can also include any property or investment assets. It’s also a good idea to bring any documents pertaining to any debts or credit owed by the individual.
3. Make some serious decisions. In order the create a Special Needs Trust, your attorney will need to know when, how, and for whom the Special Needs Trust needs to be put into action. Some of the most important questions you need to answer will be:

• When should the Special Needs Trust go into effect–access to the trust be granted? Immediately, in 5 years, in 20 years, after you die?
• Where will the funding come from? A trust is a long-term plan, so it needs a long-term source from which to draw.
• What categories of expenses would you like covered?
• Who will serve as a trustee? Who should serve as a back-up trustee in case your original choice declines this responsibility or is unable to perform the duties? It’s very important to discuss this with the people you want to name as a trustee. They may not be up to the challenge of managing a trust account and it’s better to know this sooner rather than later.

4. Find the right attorney. Your attorney should make you feel comfortable about asking questions and you should leave your appointment feeling less stressed about setting up a Special Needs Trust. Take your time and don’t rush through your appointment. Leave no stone unturned and don’t be shy when it comes to asking for clarification.

Susan Sandys can help you put together legal documents to protect your special needs child. Call today to set up a free consultation.