Why Is a Special Needs Trust Important for Your Child’s Future?

When you have a child with special needs, ensuring their future care and financial security is a top priority. One way to achieve this is by setting up a special needs trust (SNT), which allows you to provide for your child without jeopardizing their eligibility for government benefits, such as Medicaid and Supplemental Security Income (SSI).

What Is a Special Needs Trust?

A special needs trust is a legal document that holds assets for a beneficiary with special needs. The purpose of this trust is to supplement, not replace, the benefits your child receives from government programs. With an SNT in place, you can ensure that your child has access to additional resources to improve their quality of life, while preserving their eligibility for vital services, as Special Needs Alliance reports.

Who Should Be Involved in a Special Needs Trust?

Setting up a special needs trust involves three key parties:

Donor: The person who establishes and funds the trust, typically the parent or guardian.
Trustee: The individual or entity responsible for managing the trust and using the funds appropriately.
Beneficiary: The person with special needs who benefits from the trust.

You may also name a remainder beneficiary, who will receive any leftover assets if your child passes away.

Why Is It Necessary to Set Up a Special Needs Trust?

You might wonder if leaving money directly to your child or a trusted family member is enough. Unfortunately, doing so could disqualify your child from receiving essential benefits. A special needs trust helps you avoid this risk by allowing you to direct your estate to your child without affecting their eligibility for government programs.

The trust can cover a variety of expenses that improve your child’s quality of life, such as:

Personal care attendants
Special therapies or treatments
Adaptive equipment
Education and recreational activities

What Types of Special Needs Trusts are There?

There are three main types of special needs trusts:

Third-Party Special Needs Trust: Parents or other relatives establish a third-party special needs trust to benefit a child with special needs. These trusts do not require Medicaid payback provisions.
First-Party Special Needs Trust: The beneficiary can establish a first-party SNT using funds from an inheritance, legal settlement, or other source. Medicaid may receive the remaining assets upon the beneficiary’s death.
Pooled Trusts: Nonprofits manage pooled trusts that combine assets from multiple sources, such as third and first-party funding. A pooled trust is a good fallback option when the two previous options aren’t available.

How Should You Fund a Special Needs Trust?

A trust needs adequate funding to serve its intended purpose. Most parents fund the SNT upon death through life insurance, retirement accounts, or savings. However, you can contribute to the trust during your lifetime if you have sufficient resources. Knowing that the trust is funded and ready to support your child’s future needs, this strategy can offer peace of mind.

What are the Responsibilities of a Trustee?

The trustee plays a crucial role in managing the special needs trust. Their responsibilities include:

Managing trust assets
Making payments on behalf of your child (but not directly to the child)
Keeping detailed financial records
Ensuring that the trust does not affect your child’s government benefits

Some families choose a trusted family member, while others opt for a professional or corporate trustee. Either path can be successful. However, you must carefully weigh your options. The right trustee must understand the requirements of a special needs trust and prioritize the child’s long-term well-being.

Can a Special Needs Planning Attorney Help?

Creating a special needs trust involves complex decisions that require careful consideration. A special needs planning attorney can guide you through setting up the trust, planning to fund it adequately and helping you select a trustee. They will also ensure that the trust complies with current legal standards, critical for preserving your child’s government benefits.

Start Building a Secure Future for Your Child with a Special Needs Trust Today

Securing your child’s future starts with creating a plan tailored to their needs. Contact our office today to schedule a consultation with a special needs planning attorney. We’ll help you navigate the process and ensure that your child has the resources for a fulfilling life.

Key Takeaways

Protect Government Benefits: A special needs trust allows your child to receive an inheritance without losing eligibility for vital programs, like Medicaid or SSI.
Enhance Quality of Life: The trust provides supplemental needs like therapies, personal care and recreation, improving your child’s daily experience.
Ensure Long-Term Financial Security: Proper funding ensures that resources will be available throughout your child’s life.
Maintain Control Over Assets: Decide how to manage and distribute assets to protect your child’s future financial stability.
Appoint a Reliable Trustee: Select someone who will manage the trust responsibly and in your child’s best interest.

Reference: Special Needs Alliance “A Special Needs Trust and Your Plan for the Future“

Who is Legally Able to Amend a Trust?

Procrastination is the most common mistake in estate planning when people don’t create a will and trusts and when documents are not updated. For one family, a revocable trust created when both parents are living presents some complex problems now, when the surviving wife wants to make changes but is suffering from serious health issues.

As described in the article “Estate Planning: Who can amend the trust” from NWI Times, this scenario requires a careful review of the trust document, which should contain instructions about how it can be amended and who has the authority to do so. An estate planning attorney must review the trust to ensure it can be amended.

If the trust allows the surviving settlor to amend the trust, the authority to amend it may only be given to the surviving settlor. The mother may be permitted to amend the trust. However, it can’t be anyone acting on her behalf.

If the language in the trust makes the power to amend personal, a guardian or an attorney-in-fact likely won’t be able to amend the trust. Likewise, if the mother is incapacitated and cannot do this herself, the trust may not be amendable while she is ill or disabled.

However, if the trust allows the surviving settlor to amend the trust and the power is not personal, a legal representative, such as a guardian or an attorney-in-fact, may be able to amend the trust for her, if they have the authority to do so under the terms of the trust.

Anyone contemplating this amendment must be aware of any “self-dealing” issues. The legal representative will be restricted to making changes only for the benefit of the beneficiaries and should be mindful before attempting to amend the trust.

Suppose the authority to amend doesn’t exist or other restrictions make it impossible, depending on the state’s laws. In that case, it may be possible to docket the trust with the court and obtain a court order authorizing the trustee to depart from the terms of the trust or even amend the document.

Accomplishing this is far easier if all involved agree with the changes to be made. Unfortunately, if any interested parties object, it may lead to litigation.

Depending upon the desired change, entering into a family settlement agreement may be possible after the mother dies. If everyone is willing to sign off, an agreement can be written authorizing the trustee to deviate from the terms of the trust. This will also require the guidance of an estate planning attorney to ensure that the agreement follows the state’s laws.

If family members disagree with the change, the trustee can refuse to accept the settlement agreement to protect themselves from potential liability.

Reference: NWI Times (May 7, 2023) “Estate Planning: Who can amend the trust”

What Recourse Is Available if Inheritance Is Stolen?

State inheritance theft laws typically cover four distinct aspects, says Yahoo’s recent article entitled “Someone Stole My Inheritance. What Are My Options?”

The four are:

Who committed the inheritance theft,
When the theft happened,
What was taken, and
How the theft happened.

As far as the “how” goes, note that inheritance theft can take many different forms. One of the most common examples involves elder financial abuse where someone takes advantage of an elderly person’s weakened physical or mental state to steal from them.

If you think someone’s stolen your inheritance, it’s important to review inheritance theft laws in your state. Again, each state has different guidelines regarding:

What constitutes inheritance theft,
Who has the standing to bring a civil claim or file a criminal complaint concerning a stolen inheritance,
The legal grounds for successfully pursuing an inheritance theft claim, and
Penalties and remedies for inheritance theft.

Speaking with an experienced estate planning attorney can help you see if you have standing and grounds to file a claim for inheritance theft. Your attorney may advise you to take certain steps to develop a case, including:

Taking an inventory of the estate’s assets,
Reviewing estate documents, such as wills or trusts, to look for any potential signs of fraud or forgery, and
Verifying the validity of will or trust documents.

With a larger estate, you may need to hire a forensic accountant. They specialize in examining financial documents, which may be helpful if you’re struggling to create a paper trail to support a claim of inheritance theft.

Inheritance theft laws can help to protect your rights to an estate if you think your inheritance was stolen. You can also take actions to preserve your own estate for your heirs by drafting a valid will, creating a trust and choosing trustworthy individuals to act as your executor, trustee and power of attorney.

Reference: Yahoo (Jan. 18, 2023) “Someone Stole My Inheritance. What Are My Options?”

Beneficiary Battle over Presley Estate Reveals Possible Problems in Estate Planning

This is the situation facing the estate of Lisa Marie Presley, whose estate is being challenged by her mother, Priscilla Presley, as described in a recent article, “Presley beneficiary battle sets example of poor estate planning practices” from Insurance NewsNet. These situations are not uncommon, especially when there’s a lot of money involved. They serve as a teachable moment of things to avoid and things to absolutely insist upon in estate planning.

Lisa Marie’s estate is being challenged because of an amendment to the trust, which surfaced after she died. The amendment cut out two trustees and named Lisa Marie’s children as executors and trustees.

At stake is as much as $35 million from three life insurance policies, with at least $4 million needed to settle Lisa Marie’s debts, including $2.5 million owed to the IRS.

When this type of wealth is involved, it makes sense to have professional trustees hired, rather than appointing family members who may not have the skills needed to navigate family dynamics or manage significant assets.

A request to change a will by codicil or a trust by amendment happens fairly often. However, some estate planning attorneys reject their use and insist clients sign a new will or restate a trust to make sure their interests are protected. In the case of Lisa Marie, the amendment might be the result of someone trying to make changes without benefit of an estate planning attorney to make the change correctly.

The origins of the estate issues here may go back to Elvis’ estate plan. His estate was worth $5 million at the time of this death, $20 million if adjusted for inflation. His father was appointed as the executor and a trustee of the estate. His grandmother, father and Lisa Marie were beneficiaries of the trust. Lisa Marie was just nine when her famous father died, and her inheritance was held until she turned 25.

When his father died, Priscilla was named as one of three trustees. When his grandmother died, Lisa Marie was the only surviving beneficiary. She inherited the entire amount on her 25^th birthday—worth about $100 million largely at the time because of Priscilla’s skilled management.

Terminating such a large trust and handing $100 million to a 25 year old is seen by many estate planning attorneys as a big mistake. Distribution at an older age or over the course of the beneficiary’s lifetime could have been a smarter move. Lisa Marie reportedly blew through $100 million as an adult and was millions of dollars in debt, despite the estate having plenty of cash because of two large life insurance policies.

In 1993, Lisa Marie established a trust naming her mother and former business manager as trustees. The amendment in question seems to have been written in 2016, removing Priscilla and business manager Siegel as trustees, appointing Lisa Marie’s daughter and son as trustees, and naming her son and her fourteen year old twin sons as beneficiaries.

Priscilla’s attorneys say they had no prior knowledge of the change. Certain changes in estate plans require written notification of people with interest in the estate, which did not occur. They are also challenging the amendment’s authenticity, saying it was neither witnessed nor notarized. Priscilla’s name is misspelled and Lisa Marie’s signature is not consistent with other signatures of hers.

The estate is being contested, with a preliminary hearing on the matter scheduled for April 13.

Any changes to an estate plan, particularly those involving changes to the will, trusts or beneficiaries, should be done with the help of an experienced estate planning attorney. When large changes are made, or large assets are involved, a simple codicil or amendment could lead to complicated problems.

Reference: Insurance NewsNet (Feb. 17, 2023) “Presley beneficiary battle sets example of poor estate planning practices”

Can You Prevent Family Fights over Inheritance?

Inheritance battles can create new conflicts, inflame long-standing resentments and squander assets intended to make heir’s lives better. What can families do to prevent estate battles when a loved one’s intentions aren’t accepted is the question asked by the recent article, “Warning Signs Of Estate Disputes—And Ways to Avoid Them,” from mondaq.com.

Here are the more common scenarios leading to family estate battles:

Siblings who are always fighting over something
Second or third marriages
Disparate treatment of children, whether real or perceived
Mental illness or additional issues
Isolation or estrangement
Economic hardship

There are steps to take to minimize, if not eliminate the likelihood of estate battles. The most important is to have an estate plan in place, including all the necessary documents to clearly indicate your wishes. You may want to include a letter of intent, which is not a legally enforceable document. However, it can support the wishes expressed in estate planning documents.

Update the Estate Plan. Does your estate plan still achieve the desired outcome? This is especially important if the family has experienced big changes to finances or relationships. An estate plan from ten years ago may not reflect current circumstances.

Make Distributions Now. For some families, giving with “warm hands” is a gratifying experience and can remove wealth from the estate to avoid battles as everything’s already been given away. The pleasure of seeing families enjoy the fruits of your labor is not to be underestimated, like a granddaughter who is able to buy a home of her own or an entrepreneurial loved one getting help in a business venture.

Appoint a Non-Family Member as a Trustee. Warring factions within a family are not likely to resolve things on their own, especially when cash is at stake. Appointing a family member as a trustee could cause them to become a lightning rod for all of the family’s tensions. Without the confidence of beneficiaries, accusations of self-dealing or an innocent mistake could lead to litigation. Removing the emotions by having a non-family member serve as a professional trustee can lessen suspicion and decrease the chances of legal disputes.

Communicate, with a facilitator, if necessary. Families with a history of disputes often do better when a professional is involved. Depending on the severity of the dynamics, this could range from annual meetings with an estate planning attorney to explain how the estate plan works and have discussions about the parent’s wishes to monthly meetings with a family counselor.

A No-Contest Clause. For some families, a no-contest clause in the will can head off any issues from the start. If people are especially litigious, however, this may not be enough to stop them from pursuing a case. An experienced estate planning attorney will be able to recommend the use of this provision, based on knowing the family and how much wealth is involved.

Addressing the problem now. The biggest mistake is to sweep the issue under the proverbial rug and “let them fight over it when I’m gone.” A better legacy is to address the problem of the family squabbles and know you’ve done the right thing.

As we head into the holiday season, efforts to bring families together and prepare for the future will allow parents, children and grandchildren to enjoy their time together.

Reference: mondaq.com (Nov. 4, 2022) “Warning Signs Of Estate Disputes—And Ways to Avoid Them”

Estate Planning Considerations for Minor Children

Creating an estate plan with minor children in mind has a host of variables quite different than one where all heirs are adults. If the intention is for the minor children to be beneficiaries, or if there is a remote chance a minor child might become an unintended beneficiary, different provisions will be needed. A recent article titled “Children need special attention in estate planning” from The News-Enterprise explains how these situations might be addressed.

Does the person creating the will—aka, the testator—want property to be distributed to a minor child? If so, how is the distribution is to occur, tax consequences and safeguards need to be put into place. Much depends upon the relationship of the testator to the minor child. An older individual may want to leave specific dollar bequests for minor children or great-grandchildren, while people with younger children generally leave their entire estate in fractional shares to their own minor children as primary beneficiaries.

While minor children and grandchildren beneficiaries are excluded from inheritance taxes in certain states, great- grandchildren are not. Your estate planning attorney will be able to provide details on who is subject to inheritance, federal and state estate taxes. This needs to be part of your estate plan.

If minor children are the intended beneficiaries of a fractional share of the estate in its entirety, distributions may be held in a common trust or divided into separate share for each minor child. A common trust is used to hold all property to benefit all of the children, until the youngest child reaches a determined age. When this occurs, the trust is split into separate shares according to the trust directions, when each share is managed for the individual beneficiary.

Instructions to the trustee as to how much of the income and principal each beneficiary is to receive and when, at what age or intervals each beneficiary may exercise full control over the assets and what purposes the trust property is intended for until the beneficiary reaches a certain age are details which need to be clearly explained in the trust.

Trusts for minor children are often specifically to be used for health, education, maintenance, or support needs of the beneficiary, within the discretion of the trustee. This has to be outlined in the trust document.

Even if the intention is not to make minor children beneficiaries, care must be taken to include provisions if they are family members. The will or trust must be clear on how property passed to minor child beneficiaries is to be distributed. This may be done through a requirement to put distributions into a trust or may leave a list of options for the executor.

Testators need to keep in mind the public nature of probate. Whatever is left to a minor child will be a matter of public record, which could make the child vulnerable to scammers or predatory family members. Consider using a revocable living trust as an alternative to safeguard the child and the assets.

Regardless of whether a will or trust is used, there should be a person named to act as the child’s guardian and their conservator or trustee, who manages their finances. The money manager does not have to be a parent or relative but must be a trustworthy person.

Review your specific situation with your estate planning attorney to create a plan to protect your minor children, ensuing their financial and lifestyle stability.

Reference: The News-Enterprise (Sep. 10, 2022) “Children need special attention in estate planning”

Why are Trusts a Good Idea?

Estate planning attorneys know trusts are the Swiss Army knife of estate planning. Whatever the challenge is to be overcome, there is a trust to solve the problem. This includes everything from protecting assets from creditors to ensuring the right people inherit assets. There’s no hype about trusts, despite the title of this article, “Trusts—What Is The Hype?” from mondaq. Rather, there’s a world of benefits provided by trusts.

A trust protects assets from creditors. If the person who had the trust created, known as the “grantor,” is also the owner of the trust, it is best for the trust to be irrevocable. This means that it is not easily changed by the grantor. The trust also can’t be modified or terminated once it’s been set up.

This is the direct opposite of a revocable or living trust. With a revocable trust, the grantor has complete control of the trust, which comes with some downsides.

Once assets are transferred into an irrevocable trust, the grantor no longer has any ownership of the assets or the trust. Because the grantor is no longer in control of the asset, it’s generally not available to satisfy any claims by creditors.

However, this does not mean the grantor is free of any debts or claims in place before the trust was funded. Depending upon your state, there may be a significant look-back period. If this is the case, and if this is the reason for the trust to be created, it may void the trust and negate the protection otherwise provided by the trust.

Most people use trusts to protect assets for future generations, for a variety of reasons.

The “spendthrift” trust is created to protect heirs who may not be good at managing money or judging the character of the people they associate with. The spendthrift trust will protect against creditors, as well as protecting loved ones from losing assets in a divorce. The spouse may not be able to make a claim for a share of the trust property in a divorce settlement.

There are a few different trusts to be used in creating a spendthrift trust. However, the one thing they have in common is a “spendthrift clause.” This restricts the beneficiary’s ability to assign or transfer their interests in the trust and restricts the rights of creditors to reach the trust assets. However, the spendthrift clause will not avoid creditor claims, unless any interest in the trust assets is relinquished completely.

Greater protection against creditor claims may come from giving trustees more discretion over trust distribution. For instance, a trust may require a trustee to make distributions for a beneficiary’s support. Once those distributions are made, they are vulnerable to creditor claims. The court may also allow a creditor to reach the trust assets to satisfy support-related debts. Giving the trustee full and complete discretion over whether and when to make distributions will allow them to provide increased protection.

A trust requires the balance of having access to assets and preventing access from others. Your estate planning attorney will help determine which is best for your unique situation.

Reference: mondaq (Aug. 9, 2022) “Trusts—What Is The Hype?”

What’s a ‘Pot Trust’?

A pot trust is a type of trust that names the children as beneficiaries and the trustee is given discretion to decide how the trust assets should be spent. This trust lets the grantor create a single pool of assets to be used for the benefit of multiple children. A pot trust can offer more flexibility as to how trust assets are used if you plan to leave your entire estate to your children, says Yahoo Finance’s recent article entitled “How Does a Pot Trust Work?”

If you create a family pot trust for your three children and one of them experiences a medical emergency, the trustee would be able to authorize the use of trust funds or assets to cover those costs.

Flexibility is a key element of family pot trusts. Assets are distributed based on the children’s needs, rather than setting specific distribution rules as to who gets what. You might consider this type of trust over other types of trusts if:

You have two or more children;
At least one of those children is a minor; and
You plan to leave your entire estate to your children when you pass away.

Pot trusts can be created for children when you plan to leave all of your assets to them. Generally, a pot trust ends when the youngest included as a beneficiary reaches a certain age. As long as the trust is in place, the trustee can use his or her discretion to determine the way in which trust assets may be used to provide for the beneficiaries’ well-being. The aim is to satisfy the financial needs of individual children as they arise.

However, pot trusts don’t ensure an equal distribution of assets among multiple children. And a family pot trust can also put an increased burden on the trustee. In effect, the trustee has to take on a parental role for financial decision-making. That’s instead of adhering to predetermined directions from the trust grantor. And children may also not like at having to wait until the youngest child comes of age for the trust to terminate and assets to be distributed.

Setting up a pot trust isn’t that different from setting up any other type of trust. Ask an experienced estate planning attorney to help you.

Reference: Yahoo Finance (Aug. 30, 2021) “How Does a Pot Trust Work?”

Why Do I Need a Will?

Perhaps getting hit by a cement truck is too blunt for some, but unexpected things happen all the time. An estate plan, including a will and other important documents, is good preparation, especially for caregivers of people with special needs. A recent article from Forbes titled “Where There is a Will, There is a Way” explains the steps everyone, especially caregivers, need to follow.

Creating a last will and testament

This is the foundation of an estate plan. Without a will, the court will distribute assets to children equally. If a disabled person receiving government benefits receives an inheritance, they will become ineligible and lose access to services. The court will also assign guardianship to minors or disabled individuals, if there is no will. A will, in tandem with proper estate planning, ensures protection for an individual with special needs, including naming a guardian of your choice.

Having a General Durable Power of Attorney for Finances

A POA allows you to name a person you trust to manage finances, real estate property, investments, or any aspect of your life, if you become incapacitated. A POA should be created for your needs, so you may decide in advance what you do and do not want your agent to be able to do for you.

Creating a Durable Power of Attorney for Healthcare

This important legal document, paired with a HIPAA release form, allows someone of your choice to take charge of your healthcare, talk with healthcare providers and make decisions based on your expressed wishes. You may name more than one person for this role but doing so could make it harder if the two people don’t agree on your care.

Naming a Guardian

This is a critical step if you are a caretaker for a person who will likely be unable to manage their own affairs, even after attaining legal age. By naming a guardian in your will, you can select the people who will be in charge of your special needs family member or minor children. Without a guardian named in your will, the courts will make this decision.

Drafting a “Letter of Intent”

A letter of intent is a guide with important information only you know. It is especially important for caretakers. Explaining in detail your disabled individual’s preferences can make a huge difference in the quality of their lives when you are no longer available. What are their likes and likes, what people do they enjoy spending time with and what foods do they prefer, etc. If your children are minors, this letter is an opportunity to describe your preferences for how they should be raised, including religious preferences, vocational choices and even nighttime rituals.

Providing Financial Security

If your family includes a loved one with Special Needs, you can protect their ability to have funds for things not covered by government benefits through a Special Needs Trust. Your estate planning attorney will create an SNT with a trustee and a secondary trustee to oversee the funds and ensure that they are used for qualified expenses.

Reference: Forbes (July 6, 2022) “Where There is a Will, There is a Way,”

What Happens to Investment Accounts when Someone Dies?

Taking responsibility for a decedent’s probate or trust estate often involves managing significant amounts of wealth, whether they are brokerage accounts or cash assets. Today’s volatile markets add another level of complexity to this responsibility. The article “Estate Planning: Investments during administration of decedent’s estate” from Lake County News explains what estate administrators, executors and trustees need to know as they take on these tasks.

Investment account values are in a constant state of change and may include assets now considered too risky because they are owned by the estate and not the individual. The administrator will need to evaluate the accounts in light of debts owed by the decedent, the costs in administering the estate and any gifts to be made before the estate will be closed.

At the same time, too much cash on hand could mean unproductive assets earning less than they could, losing value to inflation. If there is a long time between the death of the owner and the date of distribution, depending on markets and interest rates, having too much cash could be detrimental to the beneficiaries.

The personal representative or trustee, as relevant, may determine that the cash should be invested, shift how existing investments are managed, or decide to sell investments to generate cash needed for debts, expenses and distributions to beneficiaries.

A personal representative is not expected or required to be a stock market expert. Their duties are to manage estate assets as a person making prudent decisions for the betterment of the estate and heirs. They must put the interest of the estate above their own and not make any speculative investments. With the exception of checking accounts, the expectation is for estate accounts to earn something, even if it is only interest.

If the personal representative has the authority to do so, they may invest in very low-risk debt assets. If the will includes investment powers and if certain conditions safeguarding payment of the decedent’s debts and expenses are satisfied, the personal representatives may invest using those powers. In some instances, a court order may be needed. An estate planning attorney will be able to advise based on the laws of the state in which the decedent resided.

For a trust, the trustee has a fiduciary duty to invest and manage trust assets for beneficiaries. Assets should be made productive, unless the trust includes specific directions for the use of assets prior to distribution. The longer the trust administration takes and the larger the value of the trust, the more important this becomes.

In all scenarios, investment decisions, including balancing risk and reward, must be made in the context of an overall investment strategy for the benefit of heirs. Investments may be delegated to a professional investment advisor, but the selection of the advisor must be made cautiously. The advisor must be selected prudently and the scope and terms of the selection of the advisor must be consistent with the purposes and terms of the trust. The trustee or executor must personally monitor the advisor’s performance and compliance with the overall strategy.

Reference: Lake County News (June 11, 2022) “Estate Planning: Investments during administration of decedent’s estate”

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