Special Needs Trusts: Important Update

In June the Social Security Administration announced that attorney’s fees for drafting Special Needs Trust must be approved in advance. The penalty for an attorney who violated this new rule included fines time in jail.

The result was that many attorneys decided to stop drawing up SNTs.

Fortunately, the rule has been suspended. Experts on these rules speculate the rule is gone for good – good news for attorneys and their clients.

In light of all of the recent attention to this topic, it pays to review how a SNT can benefit a person with a disability who relies on government benefits for basic needs.

Broadly speaking, the goal of a SNT is to enhance the qualify of life of a person with a disability AND allow the person to remain eligible for Medicaid and Supplemental Security Income (SSI). Government programs are intended to meet a person’s basic needs such as medical care, food, clothing and shelter. But, they often cover just the basics.

SNTs – often likened to a parent’s pocket – are intended to provide life’s “extras.” 

Here are some examples of expenses that a special needs trust might cover:

• Education
• Recreation
• Counseling
• Cosmetic medical expenses
• Medical and dental expenses not covered elsewhere
• Special equipment like wheelchairs or specially-equipped vans
• Therapy or rehabilitation services
• Training and education
• Travel, which can include the cost of a companion
• Recreation and entertainment (summer camp, movies or social events, videos, sports equipment)
• Electronic equipment and appliances, computers
• Payments for a companion
• Legal or guardianship expenses
• Insurance
• Burial expenses

But, they can do more. The funds in the SNT can be used for:

• Transportation like a car, bus pass or ride-share membership
• A vacation
• A home
• Help starting a business. 

If helping your child or loved one do these things is appealing, a SNT might be in order.

Consider hard whether siblings should take responsibility for managing funds for a brother or sister with special needs. While this may seem easier than creating the appropriate trust, this often backfires. A sibling may grow tired or resentful of this role in caring for a brother or sister and spend the money on other things leaving the one with the disability disinherited. The sibling may also become disabled or die, and the parents’ wishes may not be honored by his/her estate.

It’s also important to get a SNT in place early. If you die before the trust is established your child with a disability may inherit money from your estate and be kicked off of government benefits – or be asked to repay benefits already received.

Finally, choose a trustee wisely. A professional trustee is usually a better choice than siblings and family members.
 
A properly drafted and funded special needs trust can enhanced your loved one’s life for a lifetime – just what you want for your child. Call now to get started. 302-651-0113.