Special Needs Trusts

McHenry County & Crystal Lake

Karen M. Lavin - Special Needs Trusts

Special needs trusts: protecting your disabled family member

As the parent or grandparent of a disabled child, there are numerous additional considerations to properly create an estate plan. Individuals who suffer from disabilities that substantially impair their ability to provide and care for themselves, can benefit from a Special Needs Trust. Any estate plan for a special needs person needs to clearly state that the Trust funds held for the benefit of the special needs beneficiary are strictly for things not covered by government benefits. Government benefits normally cover basic living needs and medical needs. A properly worded and funded Trust can greatly enhance the quality of life for a disabled person. Whether it is a television in their own room, or a special needs therapist that is not covered by government benefits or who does not accept government benefit payments, there are numerous ways in which Trust funds can be used to improve the quality of life of a disabled person. It is imperative that the Trust plainly states that it is not meant to be a substitute for any government benefits that the person may be entitled to, to keep for the government benefits intact.

It is also imperative that a special needs Trust never leaves the assets to the disabled person directly. Most Trust provisions allow for the Trustee to disburse funds directly to the beneficiaries in any number of different circumstances. For instance, it is very common to see provisions that allow the funds to be directly distributed when the amount of the Trust fund below a certain amount, commonly $10,000.00. If this default clause in your Trust, it will negate your intent to keep all government benefits intact.

Normally, people are their own Trustees upon creating their Trusts. You are known as a Settlor. Upon the Settlor's disability or death, a successor Trustee, named by you at the time you created the Trust, would take over. Normally, I recommend a spouse or a close family member as Successor Trustee. Another consideration is to have Co-Trustees. That means two people acting as a team can be Trustees. Combining a close family member who is very aware of the disabled person's needs and a financial planner or trust company, for instance, make a great combination. The financial planner and professional trustee would be well versed in handling your Trust fund, making it grow and keeping the principal intact, while the other is clearly more in touch with the personal needs of the beneficiary and your value system. With a Special Needs Trust, I would not recommend having just a financial professional or a bank trust department as a successor trustee. Having the combination of a person who knows you and your child or grandchild and understands what additional needs they may have, is very important. A financial professional just would not have that perspective on the situation. Handling the assets of a Trust is a great deal of responsibility, and one often best left to the professionals. It is also time consuming and a lot to ask of a family member. So, while your Estate will have to pay for the services of a financial planner or trust department, it is money well spent. Choosing a Trustee or Trustees, is a significant part of creating a Trust, and one that requires a great deal of consideration.

The Trustee who is close to the family, will need guidance from you either by verbally given instructions and details, or better yet, by detailing those significant items in the Trust itself. For instance, if it is important to you that your special needs child maintain a relationship with a sibling or relative who lives out of state, then letting the Trustee know that Trust funds can be allocated for travel purposes for the beneficiary and a travel companion to visit those relatives or friends is important. Administering someone else's funds is quite a responsibility, as mentioned above. People tend to be much more cautious with your Trust funds, than they would be with their own funds. Therefore, you being clear on where your priorities lie and what you are comfortable seeing assets spent on, is important and should be shared with your Trustees.

Having a properly worded Trust document and the right Trustee or Trustees, can make a world of difference in the life of the special needs person after you are unable to care for them personally. Consulting with and working with an attorney well versed in special needs trusts is crucial. Do not trust this serious matter to internet forms or the advice of untrained but well meaning family members and friends.