The Special Needs Planning Toolkit – At a Glance

special needsPlanning for someone with special needs can improve quality of life for the person and their family. Generally, our goal is to help the disabled person’s loved ones to protect and set aside resources to be used for their long-term care needs. Special needs planning requires a special set of tools because there are many unique factors to consider. Above all else, we need to be careful not to harm the person’s eligibility for needs-based public benefits like Supplemental Security Income (“SSI”) and Medicaid. As we know, caring for someone with special needs can be very expensive and a loss of benefits can be disastrous.

Although these benefits are an invaluable resource, their coverage is limited and in most cases an individual’s family will need to pay for many expenses that are not covered. One of the most important tools we have is the special needs trust (“SNT”). It sounds daunting but at the most basic level, a SNT is like a bank account. We can use these special trusts to protect and hold assets for a disabled person’s benefit (the “beneficiary” of the trust) without otherwise harming their eligibility for benefits. There are a few types of SNT’s, but these are two of the most common:

Third-Party SNT – This trust will be funded using money that comes from someone other than the disabled person. For example, a parent, grandparent, sibling, or even a friend. The money in this trust may be available to pay for the beneficiary’s needs and will not be counted against him or her for the purposes of SSI or Medicaid.

There are several advantages to this type of trust. Perhaps most importantly, when the beneficiary of a third-party trust dies, any money remaining in the trust may be distributed however the creator of the trust sees fit. For example, any money remaining in trust could be distributed to the beneficiary’s non-special needs siblings.

If we can meet with a family and start planning early, sometimes we can avoid the use of a first-party trust. This helps to ensure that the money will remain in the family after the beneficiary’s death.

First-Party SNT – This trust will be funded with the disabled person’s own money. Often, this trust will be used when an adult who was not previously disabled has become disabled and needs to qualify for public benefits to help pay for their care needs. This type of trust can also be necessary when a disabled person inherits money from a deceased family member (sometimes this is caused by not having a plan in place and it can be a costly mistake).

One of the biggest differences between this and the third-party trust, is that any money remaining in this trust at the beneficiary’s death must first be used to pay back the State for any medical benefits paid out by the State on the beneficiary’s behalf. Essentially, with this type of trust, the State does not count the disabled person’s own assets against them for Medicaid and SSI purposes with the understanding that it will be repaid when the beneficiary dies.

There are many other tools that we can use depending on the circumstances. For example:

General Power of Attorney – This flexible document is used to give a loved one the authority to handle important financial and other general duties on behalf of the disabled person.

Healthcare Power of Attorney – This is similar to the general power of attorney, but it is used to allow a loved one to participate in and to make necessary healthcare decisions on behalf of the disabled person.

Guardianship – A guardianship is often a tool of last resort and may be necessary when a disabled person turns 18 but does not have the capacity required to agree to a power of attorney. In the eyes of the law, whether or not someone is disabled, they have all the rights and responsibilities that come along with reaching the age of majority until a Court declares otherwise and appoints a guardian.
This is only a quick summary of some of the terms you may hear your special needs planning attorney use. Every situation is unique and may require some combination of these tools or perhaps none of them. For more information, please call 856-857-6007 today.