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Special Needs Planning

There are estate planning options for those individuals who have special needs.  The type of planning needed depends upon each individual’s situation, but should take into account whether it is the individual’s money, or a gift from someone else, to provide for their loved ones when they are no longer around to take care of them.  There are several types of Trusts that can address an individual’s needs. 

Lifetime Special Needs Trusts, Called Payback Trusts, are Used to Protect the Individual’s Own Money, and are for Persons Who:

  • Need to spend excess income each month to keep their asset levels below the limits to receive government benefits.
  • Receive personal injury settlements that would put them over the asset limits to receive government benefits.
  • Receive an inheritance or gifts outright that would put them over asset limits to receive government benefits.

This Type of Trust holds excess resources without jeopardizing government benefits, within the following guidelines:

  • A Special Needs Trust must be funded with the individual/beneficiary’s money.
  • The individual/beneficiary must not have direct access to the funds.
  • The Trustee (who must be someone other than the individual/beneficiary) has discretion to distribute the funds according to the Trust guidelines.
  • The Trust assets may be held in a checking, savings, or other investment account.
  • Resources in the Trust may accumulate to be used for the individuals benefit during his or her lifetime.
  • Resources can be used for things such as vacations or medical benefits not provided by government programs.
  • Resources may not be distributed in a manner that would disqualify the individual from benefits.
  • There is a "Payback" provision in the Special Needs Trust that requires that following individual/beneficiary’s, any money left in the Special Needs Trust goes back to the state for reimbursement for government benefits received.

Testamentary Special Needs Trusts are Used to Leave Money to Individuals with Special Needs, Usually Through a Parent’s Will. 

These kinds of Trusts are usually drafted as part of a parent’s Will, and contain all the provisions necessary to make sure that the money does not go directly to an individual needing government benefits, but instead is held in trust.  These assets are meant to be used for those things that the government benefits don’t pay for.  Since the person with the disability doesn’t actually receive the assets directly, the assets held in this type of trust are not subject to the payback provision, as long as they have an alternate beneficiary and meets the same other restrictions as the Lifetime Special Needs Trusts.