Special Needs Trusts: How to Get the Trust & Attorney for Your Child with Disabilities

Many families in the U.S. understand the term “special needs” because they have children or other family members who require assistance with some sort of disability. Providing for the long-term care of people with special needs presents many challenges, some of them legal. Attorney Katherine Barr practices extensively in the area of special needs. In this report, she explains what legal options are available to provide for the care of individuals with special needs and how a family can find a lawyer knowledgeable in this area of the law.

Barr explains that a special needs trust is one that is considered exempt in qualifying for means-tested government benefits. These include Medicaid and Supplemental Security Income (SSI). In order for a trust to qualify as exempt, , the trustee must have total discretion concerning distributions, with the beneficiary of the trust having no legal ability to compel the trustee to make payments for his benefit. The discretionary feature of a special needs trust takes the assets out of the reach of the Social Security Administration or a state Medicaid agency in determining eligibility for benefits.

Barr says that the Social Security Administration looks very carefully at a special needs trust to see how the trust is funded and whose money is in the trust, how it got there, and how trust assets are being disbursed. State Medicaid agencies have similar concerns. “So it’s a very particular trust.” There are several types of special needs trusts. One kind contains only the beneficiary’s money. Some trusts have assets that only came from some other source, such as life insurance payments from the beneficiary’s parents, or an asset of the estate of a parent, or a gift from a grandparent. Another variant is a pooled trust, which combines many relatively small sub-accounts into a big trust.

A critical issue in helping a child or relative with disabilities is finding the right lawyer to set up and handle the trust. Barr points out that clients will be looking for a lawyer who understands public benefits eligibility rules, and trust and estate planning law., If the trust will be receiving litigation proceeds as assets, the lawyer needs to understand structured settlements. The ideal lawyer will be one who also has good relationships with qualified corporate trustees. Barr says that qualified corporate trustees are not easy to find these days.

Once a decision is made as to the type of trust that will be used, there are several places one can look to find a lawyer. Barr suggests the Special Needs Alliance as the place to start. It is a non-profit, invitation only organization that lists qualified lawyers by state. Its members have demonstrated proficiency in special needs planning. Another possibility is the National Academy of Elder Law Attorneys, Inc. (NAELA). Barr says that a client needs to be careful and know what to look for. The Academy of Special Needs Planners may provide some help. There are also lawyer rating services such as Martindale-Hubbell and Super Lawyers that may be helpful. A simple Google search may provide you with some names of lawyers who are really not qualified.

Katherine Barr is a shareholder in Sirote & Permutt, PC in Birmingham, Alabama. She is a member of the firm's Estate, Wills & Trusts department. She handles all aspects of estate planning and administration for clients. The focus of much of her practice involves special needs planning, assisting clients in providing for a child or family member with special needs in a way that does not jeopardize government benefits. She is an Alabama Super Lawyer.

Posted on November 24, 2020 .

What Are the Things You Need to Know About a Special Needs Trust? Attorney Scott Suzuki Explains

If you are a parent or family member of a person with special needs, you are probably aware of government assistance programs available to help your loved one. You may also be aware that these programs come with means-testing formulas that specify how much money someone can have and still be eligible for these benefits programs. A special needs trust is one means of providing some extra money to a person who has special needs without crossing the means test threshold. In this report, attorney Scott Suzuki , whose practice emphasizes special needs planning, explains the types of special needs trusts and how they can benefit a person with special needs.

The purpose of a special needs trust, Suzuki says, is “to enhance the quality of life of the trust beneficiary.” Living is an expensive proposition, and the public benefits programs have not kept pace with the increases in the cost of living over the last forty years. The asset eligibility limit has not changed over that period. The result is that the amounts from benefit programs no longer cover what a beneficiary needs. Rent is a good example. Suzuki points out that in Honolulu, where he lives, a 500-square-foot condominium can easily cost $2,000 per month. That could consume all of the beneficiary’s allowable assets, without allowing for food, clothing, and other necessities.

A trust will help a person maintain eligibility for public benefits. The Supplemental Security Income program, for instance, has a $2,000 asset eligibility limit ($3,000 for a couple) and complicated income rules, as well. A special needs trust set up properly will allow a public funds beneficiary to have some extra money without losing benefits.

Suzuki’s perspective on special needs trusts is that there are two kinds: first party and third party trusts. Suzuki does not consider a pooled trust as a separate type. “A first party trust . . . is funded with the assets of the beneficiary.” The trust has to be created for a beneficiary who is under the age of 65. It must be established by a parent or grandparent or by order of a court. The proceeds of a structured settlement might be a source of funds for a first party trust. A first party trust must also have a payback provision such that, at the death of the beneficiary, any remaining proceeds would be used to repay Medicaid for benefits provided under the program.

A third party trust is funded by assets that do not belong to the beneficiary. The age of the beneficiary is not an issue in this type of trust. There is also no payback provision. A typical type of third party trust is one set up by parents to leave funds to a child with special needs. A pooled trust can be funded with assets from the beneficiary or from third parties.

Suzuki says that these trusts are not one-size-fits-all documents. Forms found online or available from bar associations can be helpful as places to start, but any trust should be customized to fit the beneficiary’s needs. The Special Needs Alliance is a great place to go for information, including finding a lawyer qualified to create and handle a special needs trust.

Scott C. Suzuki is the principal at Scott C. Suzuki, Attorney at Law, Honolulu, Hawaii. In addition to a J.D. degree, he holds a Master of Public Health degree in gerontology. He is an advocate for populations with special needs. Scott is the outgoing president of the Special Needs Alliance, a national, non-profit organization consisting of some of the most credentialed public benefits and disability law attorneys in the country, committed to helping individuals with disabilities, their families, and the professionals who represent them. The Legal Broadcast Network is a featured network of Sequence Media Group.

Posted on November 24, 2020 .

Who Needs a Special Needs Trust? Attorney Bob Fechtman Explains

arents and family members of people with special needs know that there are a number of government programs available to help people with special needs. Medicaid, Supplemental Security Income, the Supplemental Nutrition Assistance Program (SNAP), and the subsidized housing program (Section 8) are all options that might be available to help a person with special needs. These programs are all needs based and have income limits that determine a person’s eligibility for help. A special needs trust can help a person with special needs by providing a source of income and assets that will not disqualify the person from receiving these benefits. Attorney Bob Fechtman explains special needs trusts in this report.

Fechtman says that a test to determine if someone is eligible for a special needs trust is to determine whether the person is eligible for Social Security. “If you’re eligible for any Social Security benefits, then under the federal law, you’re eligible to be the beneficiary of a special needs trust.” State laws might also require a look when determining eligibility to use a special needs trust.

In Fechtman’s practice, he says, he meets with a lot of parents and grandparents of kids with special needs, and the level of special needs can vary widely from child to child. Some children are almost completely dependent on others for support. Other children are very high functioning and will graduate from high school and probably get into the workforce. Determining the level of a child’s special needs will help a caregiver determine whether a special needs trust is a good solution.

Fechtman adds that, in Indiana, his home state, there is considerable flexibility in the use of these trusts, and that is very helpful with young parents and a young child. “We don’t really know how these kids [will] turn out and whether they’re going to be reliant on needs-based public benefits.” Parents can “hedge their bets” by establishing special needs trusts and adapting the trusts so that trustees have discretion in how they spend the money for the beneficiary.

As to the mechanics of the trust, Fechtman uses the example of a five-year-old for whom a trust is established. He points out that the trust might not be fully funded until both parents are deceased, perhaps thirty or forty years down the road. “It’s hard to say what public benefits that individual might need at that time” and what the individual’s working or living situation might be. Fechtman drafts special needs trusts so as to keep the beneficiaries eligible down the road by changing the way the money is spent. SSI benefits in particular get some attention because of reductions in benefits based on support provided to a beneficiary from a trust. Fechtman gives the trustee the discretion to consider the possible loss of benefits because of support payments, the age and life expectancy of the beneficiary, and how much money is in the trust. Considering these things will help the trustee determine the value of qualifying for the SSI payments for the beneficiary.

Robert W. Fechtman is the founding partner of the Fechtman Law Office in Indianapolis, IN. He focuses his practice on the problems of older persons and those with disabilities, particularly special needs trusts, estate planning and trusts, health law, Medicaid planning, guardianships and decedents’ estates. He has been certified as an elder law attorney by the National Elder Law Foundation. He is the incoming vice-president of the Special Needs Alliance, a national network of lawyers dedicated to disability and public benefits law. He is a member of the National Academy of Elder Law Attorneys, and he is the President of the Indiana Chapter of the National Academy of Elder Law Attorneys.

Posted on November 24, 2020 .