THE STAND-ALONE SPECIAL NEEDS TRUST
A special needs trust can benefit a special needs child (adult or minor) or other family member in one of two ways. One is to establish a “stand-alone” special needs trust which can be done by a competent special needs trust lawyer near me which takes effect as soon as it is created, i.e. the date it is signed.
The other is to include the provisions to establish the special needs trust as part of your will or living trust, to take effect upon your death. There are many important and practical advantages to establishing a stand-alone special needs trust.
One advantage is making it easier, safer, and less expensive for other family members to benefit your special needs child. Having other family members, such as grandparents or siblings) include a special needs trust in their own estate plan would be complex and expensive.
Making outright gifts to a special needs child can cause a loss or interruption in eligibility for SSI and Medicaid benefits. Special needs children that are in a group home with Medicaid covering the cost may be put on a waiting list for a bed due to the temporary ineligibility.
If you establish a stand-alone special needs trust for your child, you may make it easy and inexpensive for other family members to provide for that child the correct way. Making it easy is also an effective and subtle way to encourage other family members to benefit your special needs child.
It will only require a letter from you instructing them that you have established a special needs trust for the child and providing the name of the trust. Then they will just need to use the trust’s name instead of the child’s name in their trust, will, IRA, retirement plan beneficiary designation, insurance or even a check.
When you establish a special needs trust in your living trust or will, you may be under the impression that you have “taken care of things”, but that is often not the case. Unless your IRA, retirement plan and insurance beneficiary designations name a special needs trust, then the funds would be paid directly to your special needs child and cause the ineligibility described above. If your estate plan specifies for a special needs trust to be established upon your death, you’re naming a trust that does not yet exist or in some cases, never exist if your will or trust is declared invalid when you die or your will or trust is changed or redone.
PROBLEMS WITHOUT A STAND-ALONE
It can sometimes be difficult to specify this request due to limited space provided on several beneficiary forms, as well as if the form asks for the trust tax ID number or current trustee’s name, your answer would have to be “there is not one yet.”
It is generally a simple task to specify a stand-alone special needs trust on a beneficiary form, and will assure that you got it right and you won’t have to change it if you decide to later redo your estate plan.
If you become incapacitated and are unable to take care of your own finances, someone else will be given that responsibility. By law, a conservator or guardian will be appointed for you by the court (the result if you fail to have proper legal documents to name someone) can spend your money only for your personal benefit. Many living trusts and most power of attorney documents impose that same limitation. If you have specified to establish a special needs trust for your child when you pass away, the special needs trust will not help yet because you are still alive.
The best way to assure that your special needs child is properly provided for in the event you become capacitated is to have a stand-alone special needs trust in place and to have your financial power of attorney document (and living trust, if applicable) specify that, funds can be paid into the special needs trust for your child’s benefit, in the event of you incapacity.
A common misconception is if you establish a stand-alone special needs trust, you must immediately know how much of your estate you want to leave to that child and put those assets into the trust right away.
This could result in some big problems for several reasons. First, it’s nearly impossible to say how much you will be worth when you die. Second, you might need the money for yourself and last, the money you hope to leave for your special needs child may be derived from future earnings or an inheritance from someone still living.
Fortunately, that is not the case and you can establish the trust now and put assets into later. You can think of it as a safe that will be there when you need it. The course of future events and your decisions will determine when that will be.
Charles J. Moore is an experienced and award-winning estate planning and probate attorney with offices in St. Charles and O’Fallon. He can be reached at (636) 486-2669. Call today for a FREE CONSULTATION!