Whether you are the parent of a child with challenges, or the caregiver of an adult with special needs, you undoubtedly understand how important it is to protect and provide for your loved one on an everyday basis. What happens though if you suddenly become incapacitated yourself? What will happen when you are no longer here? Who will take over for you and how will your loved one’s care be funded? Will you child or loved one continue to receive help from state and federal assistance programs? These are all important questions that need to be answered sooner rather than later. Fortunately, they can be answered by including a special needs plan within your comprehensive estate plan. Although every special needs plan is an unique as the creator and beneficiary of the plan, there is a good chance your plan will include a special needs trust. In is beneficial, therefore, to learn more about a special needs trust.
State and Federal Assistance Programs
An individual with special needs can live an extremely independent life, requiring very little assistance, or he/she may continue to need a great deal of assistance on a daily basis throughout their adult life. Fortunately, assistance is available through state and federal programs such as Medicaid, Supplemental Security Income (SSI), and other similar programs. Eligibility for those programs, however, is based in part on the income and resources of the applicant. To qualify or retain benefits, an applicant’s/beneficiary’s income cannot exceed the program limits. In addition, the value of an applicant/beneficiary’s countable resources cannot exceed the program limits. For this reason, making direct gifts to an individual with special needs can have unintended negative consequences. A gift, whether it is in the form of cash, property, or other assets, can cause the loss of eligibility for much needed assistance programs.
How Can a Special Needs Trust Help?
Also referred to as a “special needs trust”, a supplemental needs trust is a specialized type of irrevocable living trust that can be used to provide “supplemental” care to a special needs individual above and beyond the care provided by state and federal assistance programs. A special needs, or supplemental needs, trust operates in much the same way as any other trust. As the creator of the trust, you will choose someone to serve as trustee who will have complete discretion over the trust property and will be in charge of spending money on your loved one’s behalf. Because your loved one will have no control over the money, assistance programs, such as SSI and Medicaid, will ignore the trust property for program eligibility purposes. The Trustee of your special needs trust cannot give money directly to the beneficiary of the trust because that could interfere with eligibility for assistance. Instead, the trustee can spend trust assets to buy a wide variety of goods and services for the beneficiary. Special needs trust funds are commonly used to pay for personal care attendants, vacations, home furnishings, out-of-pocket medical and dental expenses, education, recreation, vehicles, and physical rehabilitation.
Very precise language must be used in the creation of the trust for federal and state government programs to recognize the trust as a special needs trust. As long as the trust is properly drafted, however, your child, or loved one, will be able to benefit from the trust assets without losing any existing benefits. Because of the importance of a special needs trust, and the complex rules that must be followed for a trust to be recognized as a special needs trust, consultation with your experienced Illinois estate planning attorney is essential before creating your trust.
For more information, please join us for one of our upcoming free seminars. If you have additional questions or concerns about special needs planning, or wish to get started on your special needs trust, contact the experienced Illinois estate planning attorneys at Nash, Nash, Bean & Ford, LLP by calling 309-944-2188 to schedule your appointment today.