What is Special Needs Planning?

Special Needs Planning involves the careful planning for your loved ones who may have physical or mental impairments that impact their ability to provide for themselves.  The question may people have is how do they leave some or all of their stuff to a family member when that family member is not capable of managing finances and they are currently receiving, or may receive in the future, state or federal benefits?

Previously, people would disinherit disabled family members and leave assets to someone else who agreed to “take care” of them.  The problem with this planning strategy is there is no guarantee the person would use the assets to care for them, or if they did, what would happen to the assets if the person who holds the assets dies before the disabled family member.  There is no way of knowing whether the assets would ever be used for the benefit of the disabled family member.  Previously, if assets were left to a disabled beneficiary, it could disqualify them from the state or federal benefits they were receiving. In 1993, Congress enacted new laws that entitled disabled individuals to obtain the same estate planning benefits as non-disabled individuals. The law created Supplemental Needs Trusts, which allow you to leave your stuff to a loved one who has special needs without affecting their eligibility for the state or federal benefits they currently receive or may be entitled to receive in the future.

The law further provides the trust proceeds must be used to provide luxuries for the disabled individual he or she would not otherwise receive under the state and federal programs. Luxuries can include trips, computers, power wheel chairs, prosthetics, or other comforts not generally provided by the government.  The trust further provides for the distribution of the trust assets upon the death of the disabled beneficiary.  By utilizing a Special Needs Trust, you can provide luxuries and other supplemental benefits to the disabled family member and control the distribution of assets in the trust upon their death.

A Supplemental Needs Trusts can be created by an individual with their own funds or be created by someone other than a disabled individual, typically a parent or relative.  There are different rights and restrictions to each of these trusts, but both ensure immediate or continued qualification for federal and state benefits (i.e., Medicaid) and provide benefits to the disabled beneficiary they, otherwise, most likely, would be unable to have.