Questions About Special Needs Trust part III

A Trust is a written set of instructions for managing your assets – bank accounts, financial investments, real estate and so on. In this newsletter we will be discussing Special Needs Trusts.   A Special Needs Trust is designed to work for the benefit of a person with a disability, usually a son or daughter, brother or sister, or parent. It provides a set of instructions for managing assets set aside to help the disabled person without jeopardizing government benefits he or she might be receiving.  These trusts are relatively inexpensive to create, and are usually once-in-a-lifetime investments. For the next few weeks we will be addressing common questions. 

My sibling is disabled, can I create one for them?

Yes, But…

The United States Code section that authorizes Special Needs Trusts states that “a parent, grandparent or guardian” is authorized to establish a Special Needs Trust.  Siblings, caregivers or friends are not mentioned at all.  However, the law does not forbid siblings and others from setting up Special Needs Trusts.  The law does not specify whether the “guardian” mentioned must be Court-appointed or can be a “guardian-in-fact,” such as a concerned sibling.   And it does permit an interested third party (such as a sibling) to establish the Trust under certain circumstances.  A well-written Special Needs Trust established by someone other than a parent, grandparent or legal guardian should include a citation to this law for the sake of clarity.

The Courts in most States have recognized the right of a sibling, friend or caregiver to establish a Trust, and case law supports the idea. Call for more information and to speak with a knowledgeable attorney.

What must a Special Needs Trust say?

Special Needs Trusts require special language.  At a bare minimum, the Special Needs Trust should state that it is intended to provide “supplemental and extra care” over and above that which the government provides.  The Trust must state that it is NOT intended to be a basic support Trust.

 Can any lawyer write a Special Needs trust?

Just as most podiatrists aren’t neurosurgeons…

A family or person that wishes to benefit an individual with a disability or chronic illness will be well advised to utilize the services of an attorney that specializes in Special Needs issues.

A Special Needs Trust can very easily be “invaded” by governmental benefit sources, and the Trust can be easily invalidated if the proper language is not utilized throughout the Trust.  A poorly written Trust can cause a loss of benefits, a loss of savings, or other financial and legal hardships for the Beneficiary or the Trustee, some quite severe, including civil litigation or criminal prosecution in some extraordinary circumstances. Make certain that the Attorney you choose is especially familiar with Special Needs Trusts. Not every Estate Planning Attorney knows this area of the law.  Using a law firm that specializes in Special Needs issues assures you that the attorney is familiar with the benefits systems, the proper creation of the Trust, and ultimately the defense of the Trust in the event that it should be challenged by a court, the Social Security Administration, MediCal, or the like.