If you have a child or sibling who has special needs, you need a different approach to estate planning. Why? Because if you want to provide for that child or sibling in your Will, there are more serious consequences to consider.
For example, if your sibling is receiving benefits through their state in which they live, any money you leave for them may kick them off those benefits. They may need to spend down the money you leave for them then reapply for the benefit. The reapplication process could take some time, there is always a chance they do not get approved, or, at a minimum, you are requiring family members who care for your sibling to re-do a process they have already been through once before!
Another example, is if YOU fought for and won benefits for your child through a Medicaid program that may be providing much needed therapies, assistance or activities for your child so they can thrive. If a family member or you leave your child with special needs money to help them throughout their life after you are gone: you jeopardize their benefits! In fact, there is a high likelihood they lose their benefits.
There are three types of estate planning special needs trusts available, however, we’ll discuss one of the three in this article and the other two in two separate articles.
Here we’ll discuss Third Party Special Needs Trusts, commonly referred to as 3rd party SNTs or third-party supplemental needs trusts.
With each of these trusts, it is about three things:
- Who creates the trust?
- Whose money goes into the trust?
- Features of the trust?
Who creates a third party special needs trust?
A parent, a grandparent, a guardian, an aunt, a sister. Anyone EXCEPT the person with special needs!
Whose money goes into the third party special needs trust? (remember, sometimes referred to as a 3rd party SNT)
The money that goes into the third party supplemental needs trust is money that belongs to ANYONE except the person with special needs. So if a parent creates the trust, the parent’s money goes in. And so on for anyone other than the person with special needs.
Features of the trust? Sometimes I think of these as benefits of a third party special needs trust!
This trust allows a parent, grandparent, uncle, etc. to create a trust (think of a trust like a wooden box you put things in to keep safe). This money is used to supplement the life and support of the person with special needs. Money in a third party trust is NEVER used as the primary means of support if they person is receiving benefits or is entitled to receive benefits. Money can be used to enhance benefits, supplement benefits and support after benefits.
An important feature of a third party special needs trust is that any money left in the trust after the person with special needs passes away, the money will not be taken by any program which provided benefits, such as Medicaid. In other words, there will not be a “lien” against the money. Rather, the person who creates the trust can designate other people, say a sibling or nephew, to receive the money.
Another feature is protection of that money set aside exclusively for the benefit of the person with special needs. This type of trust is not a trust shared with any other person in the family. It is special to the person with special needs. This allows you, as the parent or grandparent, to know the money is used exclusively for the benefit of the person with special needs.
If you have a family member, a child, sister, grandchild, niece or nephew, and you want to make sure there is dedicated money to support them and their needs through a third party special needs trust, reach out to Atlanta Wills + Trusts Law Group. We can protect who you love the most with a special needs trust.