Leaving assets to a family member with special needs adds some complexity to a client’s estate plan. Individuals with special needs may be eligible for governmental or charitable benefits and leaving that individual an inheritance can disrupt or terminate those benefits. That being said, with a properly drafted estate plan, you can leave assets to your family member with special needs without affecting any governmental or charitable benefits that they may be receiving by using a Special Needs Trust. Special Needs Trusts (sometimes referred to as Supplemental Needs Trusts) include provisions that direct the Trustee to use trust funds for the supplemental needs of the beneficiary. Because the individual’s governmental benefits are used for primary needs (food, clothing and shelter), a trust for supplemental needs will not affect their eligibility for government benefits.

There are two types of Special Needs Trusts, a third party Special Needs Trust and a first party Special Needs Trust (also commonly referred to as a d(4)A trust).

A third party Special Needs Trust is often funded by parents, grandparents and other family members rather than by assets that belong to the special needs individual. Because the funds never belong to the special needs individual directly, they can be used for his or her benefit over and above any governmental benefits that the individual may be receiving. Upon the beneficiary’s death, the assets pass to the remaining beneficiaries outlined in the trust.

A first party Special Needs Trust is funded with assets that belong to the individual with special needs. The special needs individual can benefit from the trust during their lifetime over and above any governmental or charitable benefits that the individual may be receiving. However, because the trust contains the special needs individual’s own funds, this type of trust must also contain a “payback” provision. This provision states that upon the death of the special needs individual, any remaining trust property must be used to pay Medicaid back for any benefits received by the special needs individual during his or her life.

Our Special Needs Planning Services include:

  • Drafting Special Needs Trusts
  • Administering Special Needs Trusts
  • Applying for guardianship and/or conservatorship of individuals with special needs

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