Elder Law Report
Elder Law Report
Ensuring Stability through Special Needs Trusts
Unlock the secrets to securing your loved ones' financial future with the expert insights of attorneys Greg McIntyre and Samantha Gordon. On this episode of the Elder Law Report, we navigate the world of special needs and supplemental needs trusts, crucial tools that help protect individuals with disabilities without risking their eligibility for government benefits. Samantha illuminates the distinctions between first-party and third-party trusts, and provides practical examples, such as when a first-party trust is essential after a significant financial settlement. This is a must-listen for anyone looking to fortify their estate planning strategy against unforeseen circumstances.
Join us as we explore the intricacies of setting up these trusts, whether initiated by an individual, a family member, or through a legal process. Samantha guides us through the scenarios where these trusts become indispensable, such as ensuring benefits continuity for those who might inherit assets or receive settlements. We also tackle the complexities of establishing trusts for potential future disabilities in children or grandchildren, ensuring peace of mind in your estate planning. Don't miss this opportunity to gain valuable knowledge on safeguarding your loved ones' financial stability while navigating the challenges of government benefits and disability considerations.
Hi, I'm Greg McIntyre with the Elder Law Report. I am an elder law attorney, it is a snow day today and I have attorney Samantha Gordon, managing attorney in our Charlotte office. We are talking special needs trust. Today We'll also hit supplemental needs trust, which are essentially the same things, and we'll talk about what the differences are. So, Ms Gordon, Attorney Gordon, in our practice it's important for us to handle special needs planning, understand what it is, because, why?
Samantha Gordon:So the most basic way to explain it and simple way to explain it is if you have someone in your life that is on a government benefit that may be income based, or if you have an individual that has some type of possible disability or some type of need where they should not inherit outright, where they should not receive the inheritance themselves, and you need a vehicle to receive that for them, to either manage the money for them to make sure they're not disqualified from their government benefit, or both. A special needs trust is a really good tool to do that. You have your special needs trust, which is a legal vehicle where you appoint a trustee to manage that inheritance for that individual, for their health, their maintenance and their needs, while also allowing them to still get those government benefits and also not disqualifying them from those.
Greg McIntyre:Absolutely so. Let's say, I have six children and I do and I hope that none of them ever becomes disabled. I hope that all my grandchildren none of them are disabled or become disabled, but I don't know if that will be a reality. It could be. Should I still plan for a potential disabled child or grandchild in my estate plan?
Samantha Gordon:You certainly can. That would be with something called a supplemental needs trust.
Greg McIntyre:So what's the difference between a special needs trust and a supplemental needs trust?
Samantha Gordon:So a supplemental needs trust is going to be. Well, let's go to a special needs trust. So a special needs trust, as I've explained, you can have a first party special needs trust or a third party special needs trust. So it's immediately saying that if I set up a special needs trust, for if I have a child that is disabled, making sure that any inheritance that they get it goes into that special needs trust and it's automatically going to be handled by that trustee, Whereas a supplemental needs trust can be created if it is needed, and so it's whether or not you want to direct that off the bat or if that's something that may need to be created in the future.
Greg McIntyre:So I would put my supplemental needs trust and how that would work if I had a disabled child, grandchild, somebody I was giving my assets to, my money to, that it might hurt a benefit that might be on. The supplemental needs trust would be written into my will as a subtrust or in my existing trust I set up during my life as a subtrust of that trust Correct, Right, and we draft those all the time into our wills and trust those all the time into our wills and trust. If I set up a trust during my life for someone is what you're saying a first-party special needs trust would be funded by that person with a special need. In what situations might a person that's disabled have a good amount of money they need to put in a special needs trust?
Samantha Gordon:Sure. So a lot of times we see if someone was involved in a car accident and they receive a settlement, a first party special needs trust is a really good tool if you are on income-based government benefits to ensure that you can still receive that settlement but it doesn't disqualify you from those government benefits. That's one of the biggest things that we personally see when dealing with a first-party special needs trust.
Greg McIntyre:Can I, if I'm a disabled person, can I set up my own special needs trust?
Samantha Gordon:You can through the first-party special needs trust.
Greg McIntyre:Okay, if I'm competent to do so, right.
Samantha Gordon:Correct. Yes, it definitely depends on your competency. You have to have testamentary capacity in order to execute that document. So usually if we're dealing with a car accident situation, that individual if they weren't severely injured and their capacity was not affected they do have that ability to set up that trust to ensure they can get that settlement.
Greg McIntyre:Sure, and if not under D4A, it's what A parent, grandparent, legal guardian, like a general guardian or guardian of the estate One of those positions or a court order Correct One of those positions or a court order Correct Set up. That special needs trust for me if I am a disabled person.
Samantha Gordon:Correct, but do not have the capacity to execute it yourself.
Greg McIntyre:Right, right, a third-party special needs trust. Third-party special needs trust that's funded by if I wanted to set up a trust now during my life and, let's say, a child who is disabled and I wanted to go ahead and fund it with some money because it's funded by a third party benefit of the disabled person. That's the third part, the reference to the third party right, correct, cool, cool, yeah. So.
Samantha Gordon:I think it's also important to mention as well that if you have any types like so what actually goes into the special needs trust and how can you actually utilize that? So, when you have retirement or you have bank accounts, you want to ensure that if one of your beneficiaries for those monies is going to be an individual that may require special needs trust, that the special needs trust is named as the beneficiary, not the individual, because that's really going to negate what you just set up, and so really understanding how to utilize that special needs trust after you set it up is super important as well.
Greg McIntyre:Because these benefits programs, ssi, they're means tested. You can't have very much money or assets yourself, so but you know, and one of the biggest concerns for, say, a parent of a special needs child or grandchild is that if they're, if the parents, gone because they're so involved with the care of the child that this child, you know, if they leave this child, some money. Number one who's going to be in charge of it? Number two is it going to negate the benefit? And it's not just the SSI monthly payment that gets nixed, it's the Medicaid health care component and usually that's the biggest thing the Medicaid health care component that comes along with it.
Greg McIntyre:And even if you did, samantha, you know, give that special needs person money outright let's say you did fail to change a beneficiary, gave them a good chunk of money At that time that person received that money Not only would it kick that benefit offline, ssi, but also the Medicaid health care component. And, in addition, whatever Medicaid had paid out during that person's life, medicaid will reach out and try to collect that claim from whatever monies you gave them. It could take a huge chunk back out of whatever you gave that person as well. Correct, yeah, as well.
Greg McIntyre:D4a trusts are really a carve-out in a safe harbor, a safe place where a special needs person can have funds for their use and benefit, for as long as those funds last, and they're really very liberal and broad as far as what monies those monies can be used for. They can really be used for anything that SSI isn't meant for, which is like shelter and clothing, I think, or shelter, food, and you know, or you know the health care procedures benefits that Medicaid pays for. Any additional health care procedures, things like that, can be paid for also from the special needs trust.
Samantha Gordon:Yeah, so you can look at it as a way of supplementing needs and that you know that's a way to look at it.
Samantha Gordon:And when you're setting up a special needs trust whether you know that's a way to look at it, and when you're setting up a special needs trust, whether you know, for a third party or whatever it may be you want to ensure that the trustee that you're appointing so this trustee is the person that is going to be tasked with everything that we're talking about to manage that money for that person.
Samantha Gordon:And so you need to ensure that the person that you are choosing has financial capacity, meaning that they have the ability to know how to navigate this, to be able to manage funds, to make sure that they are accounting for government benefit and really someone that you can trust. And if you have children and if you have a child that would require special needs trust and maybe another child that does not, you can certainly have a child the other child listed as a trustee for their sibling, but also thinking about will that cause conflict and maybe there needs to be a third party that can come in and manage that trust. So it's really also thinking about that. At the end of the day that's what we do in a consultation is we're thinking about this and we're making sure that the client understands all the different aspects of what needs to be done to make sure that you can actually effectuate what your goal is.
Greg McIntyre:I think we have had a great discussion around special needs and supplemental needs trust. I think that planning is extremely important and I know it's important to families who have loved ones that require that assistance and I would be glad to. And thank you for joining us on our snow day. We're trying to stay warm in the house today and get some work done this morning. Everybody stay safe out there. Thank you for joining us for our talk regarding special needs and supplemental needs trust. If you or your family would like to sit down and discuss special needs planning, we do handle a lot of that at our firm. Give us a call. I would offer a free consult to sit down and do that. You can take advantage of that by calling 1-888-999-6600 or by scheduling directly on our schedules online at mcelderlawcom scheduling. Thank you, Thanks.