When it comes to estate planning, ensuring the future well-being of a loved one with special needs requires careful attention. For families, special needs planning offers vital protection, allowing individuals with disabilities to live comfortably, while safeguarding their eligibility for essential government benefits. Read this blog and reach out to an experienced Rochester estate planning lawyer from Lacy Katzen LLP to learn more about how our firm can assist you. Here are some of the questions you may have:
What Makes Special Needs Planning Different from Traditional Estate Planning?
Special needs planning is a specialized area of estate planning designed to ensure that individuals with disabilities can receive an inheritance without jeopardizing their eligibility for government benefits like Medicaid and Supplemental Security Income (SSI). These benefits are often needs-based, meaning that if the recipient has assets over a certain amount, those excess assets could disqualify the person from receiving those public benefits. Without proper planning, a well-meaning direct gift or inheritance could unintentionally leave someone ineligible for the benefits on which they rely.
The key tool in special needs planning is often the creation of a Supplemental Needs Trust (SNT). This type of trust holds assets solely for the benefit of the individual with special needs but is structured in such a way that it doesn’t count as a resource for government benefit purposes. The trust can pay for supplemental expenses such as personal care attendants, medical services not otherwise covered by Medicaid, recreational activities, and more—expenses that government programs would not otherwise cover.
How Does a Supplemental Needs Trust Work?
A Supplemental Needs Trust (SNT) is a legal instrument that allows you to set aside funds for a loved one with a disability while maintaining their eligibility for benefits. The trust is managed by a trustee, who has the responsibility of using the trust’s funds to improve the quality of life of the beneficiary, without compromising their benefits.
There are generally two types of Supplemental Needs Trusts: first-party and third-party. A first-party trust is funded using the beneficiary’s own assets—perhaps from a personal injury settlement or an inheritance received outright. A third-party trust, on the other hand, is created by someone else, such as a parent or grandparent, and is funded with that person’s assets. This distinction is important because, with first-party trusts, any assets remaining at the beneficiary’s death will need to be used to reimburse the State for benefits paid to the beneficiary. A third-party trust does not have this requirement and can be paid to whomever the creator of the trust wishes.
Establishing a Supplemental Needs Trust is not a task to be taken lightly. It requires detailed legal knowledge and a clear understanding of both federal and state laws. Working with an experienced estate planning attorney is critical to ensuring the trust is set up properly.
When Should You Start Special Needs Planning?
The sooner, the better. Many people assume that special needs planning is something that can be addressed later in life, but starting early provides peace of mind. Waiting until a crisis or unexpected event forces decisions can lead to unnecessary stress and could limit your options. Engaging an estate planning attorney sooner rather than later can ensure that all your bases are covered.
An experienced attorney can help you assess the unique needs of your family and develop a plan tailored to your specific circumstances. Whether it’s determining the right type of special needs trust or exploring additional options like guardianship, having the proper legal framework in place ensures your loved one will be well cared for in the future.
