As the parent of a teenager with autism, I know that parenting a child with special needs can be overwhelming. Every single day brings unanticipated challenges and concerns. One of our greatest worries is what will happen to our son when we are gone? If you have a disabled child, you probably have the same concern. Planning ahead for that eventuality will afford you and your family options and peace of mind.
The Importance of Special Needs Trusts
Special Needs Trusts are an important vehicle to preserve the financial security and lifestyle of individuals with disabilities. These Trusts allow a disabled individual to receive inheritances, gifts, or other funds, and maintain eligibility for public assistance programs like Medicaid or Supplemental Security Income. It is important that these trusts be drafted in such a way so that the funds will not be considered as belonging to the disabled beneficiary. Distributions from these trusts can be used to pay for “supplemental” expenses not covered by SSI like education, entertainment, and hobbies beyond the basic necessities of life.
What are Special Needs Trusts?
There are two types of Special Needs Trusts: First-party special needs trusts and third-party special needs trusts. First-party special needs trusts are funded with assets owned by the individual that has a disability (through a court settlement, inheritance, etc.). These trusts are irrevocable and must be approved by the Department of Human Services and by the Social Security Administration. Upon the death of the beneficiary, the state is reimbursed from the remaining assets to the extent that the beneficiary received Medicaid benefits. This reimbursement is known as a “pay back.”
A third-party special needs trust is created on behalf of an individual with a disability with funds that do not belong to that individual. These trusts are frequently funded by parents or grandparents and need not be irrevocable. A significant advantage of these trusts is that the creator of the trust can designate a remainder beneficiary and avoid a payback.
Special needs trusts are complex, but will provide you and your family peace of mind. It is very important that you speak to experienced counsel who can help navigate you through these issues. Please call the attorneys at Wuliger & Wuliger at (216) 781-7777 to schedule a special needs planning consultation.