Protecting Your Child’s Future: How Special Needs Trusts Keep Benefits Intact While Building Financial Security
When you have a child with disabilities, one of your greatest fears is what will happen to them after you’re gone. How will they maintain their quality of life? Will they lose crucial government benefits if they inherit money? These concerns keep many parents awake at night, but there’s a powerful legal tool that can provide peace of mind: the Special Needs Trust.
Understanding Special Needs Trusts: Your Child’s Financial Safety Net
A special needs trust (SNT) is a trust that will preserve the beneficiary’s eligibility for needs-based government benefits such as Medicaid and Supplemental Security Income (SSI). It allows people with special needs to enhance their quality of life with money and assets received from others without losing SSI and Medicaid.
The genius of these trusts lies in their structure. Because the beneficiary does not own the assets in the trust, he or she can remain eligible for benefit programs that have an asset limit. This means your child can receive financial support while continuing to qualify for essential services like healthcare coverage, housing assistance, and disability income.
Recent Changes Make Special Needs Trusts Even More Valuable
Exciting developments in 2024 have made Special Needs Trusts more flexible and beneficial than ever before. Effective September 30, 2024, food, from whatever source, has been removed from the definition of ISM. That makes life easier on the trustees of special needs trusts, who can now pay for a beneficiary’s groceries, a restaurant meal, or an outing that involves food without affecting government benefits.
This change is significant because trustees can now use trust funds for groceries, restaurant meals, or food costs related to outings without reducing the beneficiary’s SSI payment. Improved Quality of Life for Beneficiaries: Beneficiaries can receive better nutritional support from their trust, potentially leading to improved health and well-being.
Types of Special Needs Trusts: Finding the Right Fit
There are several types of Special Needs Trusts, each serving different circumstances:
- Third-Party Special Needs Trusts: A third-party SNT, frequently referred to as a supplemental needs trust, is funded with assets belonging to a person other than the beneficiary. Typical funding comes from gifts, an inheritance from parents or grandparents, and proceeds of life insurance policies.
- First-Party Special Needs Trusts: A first-party SNT, also referred to as a “self-settled” or “(d)(4)(A) trust,” is funded with assets or income that belong to an individual with a disability. Typically the funding comes from a personal injury settlement or inheritance the beneficiary receives directly.
- Pooled Special Needs Trusts: In a pooled trust, gifts to many disabled beneficiaries are combined so that they can be efficiently and professionally managed and have better investment options. The trustee invests and spends funds for the beneficiaries without affecting their eligibility for SSI and Medicaid.
What Special Needs Trusts Can Pay For
Special Needs Trusts offer remarkable flexibility in enhancing your child’s quality of life. Special needs trusts are supposed to be used to purchase goods and services not covered by public benefits. Some examples are: Medical costs that are not covered by Medicaid or Medicare, such as some dental care and special therapies · Service animals and some assistive technology expenses · Computers, phones, and other personal communication devices.
The trust can also fund spending money, electronic equipment (such as books, radios, CD players, television sets, and computer equipment), camping, vacations, athletic contests, movies, trips, payments for a companion and for personal care needs, and other items to enhance self-esteem. Most importantly, it can include alternative medical treatments, chiropractic care, and even massages.
The Importance of Professional Guidance
For a trust to qualify as a special needs trust and protect a person’s public benefits, the trust must be set up and funded properly. Therefore, it’s important to work with an attorney who understands special needs trusts when figuring out what will work for your family.
This is where experienced legal counsel becomes invaluable. A qualified Wills and Trust Lawyer Suffolk County can navigate the complex regulations and ensure your trust complies with both federal and state requirements. The stakes are too high to risk improper setup – failure to do so could result in a loss of eligibility for benefits such as Medicaid or Supplemental Security Income (SSI). All of which to say, failure of a special needs trust to comply with the law can create a financial crisis for the beneficiary.
Working with Fratello Law: Your Long Island Partners
Fratello Law understands the unique challenges facing Long Island families. The legal services we provide our clients are not only important – they impact the lives of our clients and their loved ones. That’s why professionalism must be carefully combined with the empathy and compassion our clients deserve. Our experienced Long Island lawyers and staff take pride in focusing on each client’s individual needs and taking the time to understand those specific needs.
Founded in 2012, The Long Island-based law firm of Fratello Law, P.C. With offices located in Nassau County and Suffolk County, our attorneys serve clients on Long Island and in New York City. Our experienced elder law and estate planning attorneys and staff take pride in focusing on each client’s individual needs and taking the time to understand those specific needs.
What sets Fratello Law apart is their commitment to accessibility. Along with office consultations, we also offer consultations by telephone, video conference (Zoom), and at home for homebound clients. We visit clients in rehabilitation centers, hospitals, nursing homes and assisted living residences. We are available early morning and after-hours in an effort to be available when you need us most.
Taking the Next Steps
Creating a Special Needs Trust is one of the most important gifts you can give your disabled child – the gift of financial security without sacrificing essential benefits. These steps can help take the anxiety and worry out of your child’s financial future and make sure that your child will be taken care of even after you’re gone.
Don’t wait to protect your child’s future. With all the daily responsibilities that parents juggle when one of their children has a disability (and, therefore, special needs), it’s tough to find time to plan for the future. But that’s what it takes when a loved one has a disability that may affect his/her ability to be self-supporting.
The recent regulatory changes have made Special Needs Trusts more powerful and flexible than ever before. Combined with experienced legal guidance from a firm that understands both the law and the emotional weight of these decisions, you can create a comprehensive plan that secures your child’s financial future while preserving their access to vital government benefits. Your peace of mind – and your child’s security – are worth this important investment.