Special Needs Planning

Special needs planning focuses on providing for the special needs of your loved ones with disabilities when you are no longer there to organize and advocate on their behalf. Parents and relatives of children with special needs must take care in estate planning to coordinate all legal, financial, and special care needs of their children—now and in the future.

Because of the nuances and complexities of special needs planning and qualifying/maintaining eligibility for public benefits, retaining a qualified elder law attorney is critical.

Our attorneys can help you by recommending and preparing the following trusts, as appropriate:

Support Trusts

Support trusts require the Trustee (trust manager) to make distributions for the child’s support, such as needs like food, shelter, clothing, medical care, and education.

The following are characteristics of a support trust:

  • Can ensure that your assets and savings are used toward supporting your child’s basic needs, as well as specialized medical attention and education.
  • Provides a consistent income to your child with disabilities, ensuring safety and wellbeing for basic needs.
  • Exempts your beneficiary (or beneficiaries) from financial assistance through Supplemental Security Income (SSI) or Medicaid. Thus, if your child needs this, you should avoid creating a Support Trust.

Special (or Supplemental) Needs Trusts

A special needs trust is often the most effective way for a parent to help their child with special needs. This legal document manages resources while maintaining the child’s eligibility for public assistance benefits such as Medicaid, Social Security Disability Insurance, or Supplemental Security Income.

Features of a special needs trust include:

  • Assets are distributed according to the discretion of the Trustee (trust manager).
  • Money of the trust cannot be used for basic needs covered by public benefits but can be used for things not covered by public benefits, such as vacation, restaurant meals, sporting goods, social outings, legal fees, and medical costs.
  • Allows the child to take advantage of public benefits while providing resources for other activities and care.

Additionally, there are three types of special needs trusts, which include:

  1. Third-Party Special Needs Trust: This type of trust is created using the parent(s) or relative’s assets as part of an estate plan distributed by a will or living trust.
  2. Self-Settled Special Needs Trust: This type of trust is funded using the child’s assets, such as when a child receives a personal injury settlement and will require lifelong care. Payback to the state is required after the child’s death, but only to the extent that the child receives public assistance benefits.
  3. Pooled Trust (“(d)(4)(C) trust”): This type of trust is a special needs trust with a twist. It is created by a nonprofit organization, with individual beneficiaries creating accounts within the larger trust and “pooling” their assets together—though each beneficiary’s account remains their own. Because a pooled trust accepts contributions from many beneficiaries, it can make more stable investments and provide additional management services. It also does not prevent a special needs person from accessing government benefits, as the trust’s funds are used as a supplement to these benefits.

Trusts Created by Special Needs Individuals

As of December 2016, it is now legal for people with disabilities to create their own special needs trusts rather than relying on others. If competent to do so, people over the age of eighteen with disabilities can now create a trust on their own behalf, using their own resources, to protect their assets while preserving their public benefits.

When a family decides that a special needs trust may be right for them, they typically have a host of questions about the process. The most common questions that we see from families considering a special needs trust include:

Do I need a lawyer to set up a special needs trust?

There is no legal requirement that a family must work with a lawyer in order to set up a special needs trust. However, trusts work best when they are tailored to the specific situation in which they are being used. For assistance in personalizing a special needs trust so that it is effective and comprehensive for the unique requirements of your situation, it is best to rely on a legal professional with experience in drafting trusts.

What happens to the money in a special needs trust at death?

Where the money in a special needs trust will go at death depends on a variety of factors, including what type of trust was set up. In general, if the person with special needs took advantage of any Medicaid benefits during their lifetime, the state will claim some or all of the trust money to repay those services. Any assets that are left over after this process will go to any beneficiaries specified in the trust document, less taxes and other expenses. Writing beneficiaries into a trust is one of the many reasons why a skilled legal professional is a wise choice when drafting a trust; unclear or inconsistent wording could cause undesired issues with asset distribution later.

What can the funds in a special needs trust be used for?

Special needs trusts are intended to assist an individual with items or experiences that supplement their lifestyle. Because public benefit programs are not intended to cover all of life’s costs, a trust can generate the quality of life that a special needs person deserves. Uses of a trust can range from purchasing medical equipment to rideshare payments and even securing a home or starting a business. However, trusts are not intended to cover all of an individual’s costs. It is important that a trust never pay out cash or cash equivalent, as this counts as income and can disqualify a special needs individual from important benefit programs like Medicaid.

What expenses can't a special needs trust pay for?

A special needs trust is intended to supplement the lifestyle of an individual and provide fulfillment and opportunity. It is not intended to replace public programs like SSI. This means that the value in a trust should never be used to pay for basic necessities such as food, rent, or utilities. While using a trust in this manner is not illegal, it can have far-reaching consequences and should only be considered in consultation with a legal professional who is experienced in special needs trusts.

Can a special needs trust be broken?

Special needs trusts are typically irrevocable; this means that they cannot be “broken.” However, in specific circumstances and with the help of a disability or planning attorney, special needs trusts can sometimes be amended as an individual’s situation changes or if proper special needs planning was not done originally. Trusts must sometimes be amended in court, but there are a number of out-of-court options as well.

Whether you are a parent of a child with special needs, a relative of an individual with disabilities, or someone with a disability who wants to create their own trust, the special needs planning attorneys at Salines-Mondello Law Firm, PC can help. We can provide advice on which type of trust is appropriate for your specific situation, prepare your trust, and make sure your assets are protected for the future. To get started working with a special needs planning attorney in North Carolina today, contact our office by phone at (910) 777-5734 and schedule your first, fully confidential consultation.