Practice Areas

Special Needs Planning

Life Requires Planning . . .

If you have a disabled loved one, a child or a grandchild, you recognize how vitally important it is to ensure that such loved one receives all of the care and attention that their special circumstance requires.  You want to utilize—and maximize—your assets in a way that will enrich your child’s life.  However, providing all of that care and attention is expensive.  Accordingly, it is important that you preserve the public benefits available to them.  Economically, a number of government programs exist to support disabled individuals.  These programs include Supplemental Security Income (SSI), Social Security Disability Income (SSDI), Medicare and Medicaid.  To be eligible for some of these programs, the disabled individual can only earn a nominal amount of income and own very limited resources.  The receipt of cash or other liquid resources, either through a Will or by beneficiary designation, will frequently disqualify a disabled individual from receiving the above mentioned government benefits.  If the individual has substantial physical needs, the loss of Medicaid alone can be devastating.

What Are Your Options? Parents (or other family members) of disabled children have four options with respect to their estate planning: (1) disinherit the disabled child; (2) distribute the assets to the disabled child; (3) distribute assets to siblings with the understanding that the siblings will use the assets for the benefit of the disabled child; or (4) distribute assets to a SNT (a “Special Needs Trust”).  In most cases, you want to provide, in some fashion, for the child, so disinheriting them is not a viable option.  If, instead, you distribute assets outright to the child, the government benefits the child is receiving may be reduced or eliminated as a result of the inheritance.  In addition, the child may be charged for program benefits previously received.  The third alternative, to distribute assets to a sibling of the disabled child with the understanding that the sibling will use the monies for the benefit of the disabled child also presents certain problems.  For example, the assets are exposed to creditors of the sibling (including in the event of the sibling’s divorce) and there is also the risk of misappropriation or mismanagement by the sibling.  Also, if the sibling spends more than $13,000 per year of the inheritance for the benefit of the disabled person, a taxable gift may result.   This leaves us with one remaining option: establish a Special Needs Trust.

What Is a SNT? A SNT can be established and funded either during your lifetime or upon your death.  The primary purpose of a SNT is to benefit a loved one who qualifies for public assistance programs that are means-tested.  The assets in the trust are available to supplement (but not replace) the benefits being provided through government programs.  In addition, since the loved one is often unable to manage his or her financial affairs, by establishing a SNT the parent ensures proper management by a qualified trustee.  Further, a SNT is designed so that the funds are not considered “available” to the beneficiary and, therefore, benefits are preserved.

Our Plan. At Fendrick & Morgan, LLC, our approach to planning for individuals with special needs is to be proactive.  We want you to have the necessary documents in place during your lifetime so that the benefits your loved one is receiving are not jeopardized after your death, when they might receive an inheritance from you.  When drafting a SNT, the specific needs of the individual beneficiary must be carefully considered in light of the complex rules and regulations which surround these Trusts.  We are guided largely by the Program Operations Manual System (POMS), which is published by the Social Security Administration (SSA) and contains the operating procedures for SSI.  We also must be careful in counseling our newly appointed Trustees regarding how the SNT should be administered.  Improper distributions from a properly-drafted and funded trust can cause the loss of public benefits to the beneficiary of the trust.

Benefits of Special Needs Planning

• Preserve valuable government benefits being provided to a loved one.
• Avoid dissipation of assets, paying for a loved one’s medical, housing and other support needs.
• Appoint a qualified Trustee to manage Trust assets and control distributions.
• Ability to designate ultimate Trust beneficiaries.
• Avoid estate recovery.
• Peace of mind.