Protecting Special Loved Ones With a Special Needs Trust

Many families struggle daily with the demands of caring for a family member with health or developmental challenges. Whether it is autism, Parkinson's, cerebral palsy, birth defects or some other debilitating condition, the challenges can be immense. Perhaps one of the more challenging aspects which these families face is making sure that resources are available to provide medical and other necessary benefits over the course of the family member's lifetime.

Often these families can only turn to governmental programs such as "Supplemental Security Income" or "SSI" and Medicaid to meet the overwhelming demands. For example, take the situation where a child, age 6, suffers from autism. Depending on the circumstances, the family may only be able to get medical coverage through Medicaid. The child could live many, many years and need benefits during that time. If the child lives 60 years, and the medical and other care bills for the child average $10,000 per year, then the benefits would be huge!

Where many families fail to prepare is in the event the parents or other family members die and leave inheritance monies to the special needs child. That inheritance could jeopardize the child continuing to receive benefits. So if the inheritance is not enough to provide for the child's needs over a lifetime, those lost governmental benefits would have an enormous impact.

Instead, families with children or other family members on these needs-based governmental programs should set up atype of irrevocable trust known as a "special needs trust" or "SNT"). If this is done correctly, the inheritance monies can go into the SNT and can be available to provide for the child over his or her lifetime. So long as the SNT does not duplicate governmental benefits and otherwise complies with the limitations set forth by the applicable governmental program, then the governmental benefits will continue uninterrupted.

However, an SNT is a complicated planning document which should be prepared by an attorney skilled and experienced in drafting these kinds of trusts. In setting up a SNT, one of the most important decisions is who will be the Trustee--the person in charge of the SNT--after you're gone. That person should be someone you trust without reservation and should be capable of handling financial matters. In some cases, if you do not have the right person to serve as Trustee, you might consider using a professional Trustee.

Another consideration in a SNT is who will be the beneficiary after the special needs individual passes away. You will want to name a contingent or residuary beneficiary to address this situation. 

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