Parents and caregivers of loved ones with special needs are used to having to plan ahead for, well, pretty much everything. Even simple outings to a park or store usually require advance planning. How accessible is the location? What will the level of external stimuli be? Will you need to pack medicine or extra supplies?
This forward-thinking mentality is part of caring for someone with special needs, but it’s easy to avoid taking it to its conclusion—planning for a child or loved one’s care after you pass away.
That isn’t to say you don’t worry about it. Arranging for long-term care is usually one of a special needs caregiver’s top concerns. But because such arrangements are time-consuming, complicated legal matters, it’s easy to get so busy that you miss out on opportunities within the available special needs estate planning tools.
One of the most misunderstood of these tools is the special needs trust.
What is a special needs trust?
A special needs trust is a legal arrangement and fiduciary relationship that allows a physically or mentally disabled or chronically ill person to receive income without affecting their eligibility for government benefits.
A special needs trust is created when a parent or legal guardian puts assets into a trust. This can include real estate, investments, interest payments, life insurance policies, etc. Funds from the trust are used to pay for care and support, but since the assets belong to the trust and not the individual, they will not impact eligibility for supplemental Social Security Income (SSI) or disability benefits.
Special needs trusts can provide parents and guardians with tremendous peace of mind that their loved one will be well cared for. So why aren’t they used more often?
Unfortunately, there are some common misconceptions and myths about special needs trusts that stop parents from taking advantage of them.
Myth 1: Special needs trusts are too expensive
It’s no secret that hiring a lawyer can be expensive, but setting up a special needs trust is more affordable than you might think. They aren’t only for the wealthy, which is good since the resources of special needs families are almost always impacted by the care currently required.
And since it’s hard to put a value on the comfort of knowing your child or loved one is taken care of, not setting up a trust is something you can’t afford to skip.
Myth 2: You can set up a special needs trust by yourself
Like everything else these days, there are AI and DIY options out there that will help you set up a special needs trust. But just as you wouldn’t go to a plumber for a root canal, you shouldn’t leave something as important as your child or loved one’s care in the hands of anyone other than an experienced professional.
The consequences are too significant.
Special needs trusts are nuanced, complex legal entities. They require technical and precise language to ensure the assets included are not part of eligibility determinations for governmental benefits. So while you can set up a trust by yourself, consulting an attorney will leave you with peace of mind that the matter is handled correctly. (Instead of staying awake at night wondering what if)
Myth 3: If you already have a will, you don’t need a special needs trust
Having a will is a great start on long-term care planning for your child or loved one, but it isn’t enough. A will only becomes effective after you pass away, which means parents who only have a will have nothing in place to ensure continuity of care if they become incapacitated.
The other issue with a will is that anything you bequeath becomes their property, immediately impacting their eligibility for needs-based and entitlement programs like SSDI.
Another related myth is that young, healthy parents have ample time to set up trust in the future. It isn’t pessimistic to recognize that life is fragile and anything can happen at any time; it’s actually responsible to recognize this fact and plan accordingly.
Myth 4: Special needs trusts are only for the wealthy
Many people assume trusts are only for rich people lucky enough to have a lot of major assets to divide up.
This isn’t true.
First, as the Special Needs Alliance points out, you don’t have to have a house in Martha’s Vineyard to mess with SSDI and Medicaid eligibility. If your child or loved one stands to inherit anything more than $2,000, they will be better served if you put those assets into a trust.
Second, a trust does more than just handle money. Setting up a trust will also help you plan how to receive (and transfer, if necessary) legal guardianship after they reach adulthood. It will also lay out steps that need to be taken if the trustee (i.e., you) becomes incapacitated or otherwise unable to fulfill their fiduciary obligations.
Myth 5: Family and friends can handle it when the time comes
Even if your children, family members, and friends are willing to help out now, you have no way of knowing what their situation will be when they actually need to step up. They may have their own children or health concerns that will make it hard for them to provide an adequate level of care, encounter financial difficulties, move far away, etc.
Special needs trusts have two primary objectives: fiduciary management of assets and ensuring care delivery. Setting up a trust with specific instructions for the money you’ve set aside ensures the money can’t be misappropriated or put at risk by another family member’s issues.
Let our team of experienced professionals help you
Our team at Shann M. Chaudhry Esq., Attorney at Law PLLC, has extensive experience helping families design and execute special needs trusts that deliver effective long-term care for their children and loved ones. Let us help you today.