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Estate planning for parents and grandparents with family members who have special needs can be
especially tricky. Such "special needs" individuals may include children with developmental disabilities,
physical or mental or may encompass adults with mental illnesses such as bipolar disorder, schizophrenia,
or manic depression, or in some cases the disabilities may come from injuries or accidents which interfere
with, or prevent, normal productive lives, holding a steady job, and earning a sustaining income.
WHO IS A "SPECIAL NEEDS" PERSON?
Benefit Eligibility. Many special needs individuals also qualify for various state and federal assistance
programs such as Social Security Disability Income (SSDI), Supplemental Security Income (SSI), Medicare or
Medicaid. Eligibility for such programs is often based on need, that is countable assets below $2,000.
To preserve eligibility for government benefits, a typical solution was to "disinherit" the special needs
individual and rely on other family members to care for the special needs person when the care giver has
passed away. This outdated solution has obvious pitfalls in that there is no certainty that continued
assistance will be made available by these family members because of their own needs, creditors, financial
difficulties, etc.
WHAT TO DO?
Enter the Special Needs Trust.
What is a "Special Needs" Trust? A Special Needs Trust can be set up either during lifetime, or at death
through a Will or the terms of a Revocable Trust to provide carefully crafted assistance to a special needs
person from a pool of assets assigned to the Trust. Usually, the language of the Trust is designed to
preserve eligibility for government benefits. So far, these "Third Party Trusts" have been effective to avoid
being considered as "countable" assets for determining eligibility. This is a continually changing area of the
law as Congress confronts the fiscal realities of an aging population and the expanding care requirements
that go along with advances in medical care, which are keeping all of us alive longer.
Other Considerations. Many factors need to be examined in designing a custom fitted estate plan, which
includes special needs considerations, including this checklist of criteria:
1. The amount of assets available;
2. Existing or future qualification for government assistance;
3. How much assistance will be needed;
4. Who will manage the money as Trustee;
5. What is the criteria for a Trustee to follow;
6. How is a human touch going to be maintained and how will a Trustee know the needs of the beneficiary
and the wishes of the Grantor after a decade or two has passed;
7. Given the costs of care, including medications, how important is continued eligibility for government
assistance, balanced against:
a. Assets available and degree of comfort that is desired.
b. The annual living expenses of the individual;
c. The percentage of expenses that is private and the percentage that is public.
Needs Change. As a special needs person ages, his or her needs and requirements may change, as well.
An individual who is surviving in a community with a minimal job may require very little assistance. However, a
change in the medical outlook, or simple aging, may make the existing arrangements impractical five, ten or
twenty years in the future. All these considerations make planning a Special Needs Trust and coordinating it
with other estate planning objectives a real challenge.
The eligibility requirements for various government programs are continually evolving. For example, Spousal
Annuity Trusts, thought to be a sure-fire way of protecting family assets while establishing Medicaid eligibility
for a needy spouse, are now under attack in a number of states around the country. Conversely, if the special
needs individual is receiving benefits under SSDI, which is not needs based, perhaps there are sufficient
assets with projected income to provide for the special needs individual privately, without being exposed to
the maze and complexity of eligibility rules designed to preserve Medicaid type programs for the truly needy.
These are hard decisions, many times involving a substantial portion of family emotion, as well as financial
resources.
Flexibility in drafting estate planning instruments, and thorough knowledge of the trends in eligibility for
various types of government benefits, are essential prerequisites for these challenging estate planning
assignments. Frequent updates and modifications may be necessary to stay up with new statutes and
regulations.
©BRANDT, FISHER, ALWARD & ROY, P.C.
This newsletter is provided for informational purposes and should not be acted upon without professional
advice.
| WEALTH CONSERVATION: PROFESSIONAL ALERT Brandt, Fisher, Alward & Roy, P.C. |
| January 2001 ESTATE PLANNING FOR "SPECIAL NEEDS" by James R. Modrall III, J.D., C.P.A. |
| If you would like to receive future editions of the monthly Wealth Conservation Newsletter directly to your e-mail account, please e-mail our office using the following link: Estate Planning Newsletter |
| Brandt, Fisher, Alward & Roy, P.C. Attorneys at Law |