Special Needs Trusts
The Use of Trusts to Protect Disabled, Handicapped Children: Feather the Nest with A TLC Trust
"Working with Hanlon Niemann over the years has been a pleasure for me. They have been professional all the way. Their entire staff of attorneys, paralegals, secretaries and support staff always make me feel comfortable."
—Erik Hove, Manalapan, NJ
What do you do if you are an elderly parent who is still caring for a disabled child who can’t care for him or herself?
There are “empty nesters” who have never really had an empty nest. These are parents of children with disabilities such as autism, cerebral palsy, hearing loss, mental retardation, vision impairment, muscular dystrophy, genetic and chromosomal disorders, Down’s syndrome, and fetal alcohol syndrome, to name just a few.
Some disabilities are apparent at birth, and others are caused by accidents or manifest themselves as mental illness later in life, but the end result is the same: The child is being cared for by a loving parent who worries about who will provide care for that child once the parent is gone.
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A special needs attorney can assist families like this in developing proper planning so that they can help the parents to create a better way to manage both money and care after they are gone.
The most common advice of the attorney who does not practice in the area of special needs trust planning (sometimes called Tender Loving Care (TLC) Trusts) has been for the parent to disinherit the child. Disinherit means to make sure you leave that disabled child with absolutely no allocation of money directly. This gives the simplistic idea that one should just leave extra money to one of the other children who will provide care for the disabled child and money management.
Even in the best of families, this is usually a disastrous idea for the following reasons:
- It’s extremely difficult for an individual who receives extra money not to co-mingle that money with their own, and eventually treat it as their own. That money would become available in the event that the healthy child becomes divorced or is otherwise subject to loss to a creditor.
- In many families, the dynamic is such that the healthy children have some anger or resentment toward the disabled child because that sibling got more attention. Thus, healthy children may not want the role of caregiver and banker for their disabled sibling.
- And most unfairly, leaving money to one child for disbursement to another child puts a target on the back of the healthy child, in that all complaints and concerns about money will be directed to that individual.
It is the job of the elder law and special needs attorney to assist families like this in developing proper planning so that we can help the parents to create a better way to manage both money and care after they are gone.
A TLC Trust is designed to work in partnership with any public benefits such as Supplemental Security Income and Medicaid. It is a way for parents to leave money for the needs of their child beyond what public benefits would pay. A TLC Trust can provide supplemental care for recreation, social activities, pets, special therapies, entertainment, and even vacation opportunities for a child by the use of trust money. A TLC Trust can also purchase professional care management, which can enhance not only the dignity, but the quality of life of a disabled child. The TLC Trust is a far more loving and caring solution to the challenge of providing for a child with special needs.
You don’t have to disinherit your child with a disability; contact Fredrick P. Niemann, who can assist you in designing a custom plan to meet the very special needs of your child, so that he or she can be given tender loving care after you have passed away.
CONSULT WITH A SPECIAL NEEDS TRUST ATTORNEY
A Special Needs Trust (SNT) is the ideal planning tool if you have a disabled child or other family member who is disabled. It holds assets for a disabled person without disturbing eligibility for public benefits. SNT assets are used to supplement public benefits. The trust pays for items and services that the public benefits system does not provide.
DO YOU HAVE A DISABLED CHILD OR OTHER FAMILY MEMBER?
Here are some commonly asked questions.
Do you need a special needs trust for an impaired, disabled or incapacitated child or adult in New Jersey?
Millions of Americans have disabled family members. The cause may be a serious personal injury accident, Down ’s syndrome, schizophrenia, cerebral palsy, autism, multiple sclerosis or countless other physical or mental illnesses.
If you have a child (young or older) who is disabled or if you know someone who does, you should learn about Special Needs Trusts. These trusts are designed to hold assets for the benefit of an individual who is receiving public benefits and to help that person without causing disqualification. If the person is receiving Supplemental Security Income (SSI), Social Security Disability (SSD) or some form of state aid, they will continue to do so with a properly drafted Special Needs Trust. If they are in subsidized housing, they would continue to live there.
Why use a Special Needs Trust for a disabled individual?
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The disabled beneficiary will keep his/her income (SSI or SSD) and health care benefits.
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Money in the trust can be used to pay for items and services not covered by public benefits.
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Money in the trust can be used to pay for a doctor who will not accept Medicaid.
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Parents control where trust assets go before and after the child is deceased.
A Special Needs Trust is the ideal planning tool if you have a disabled child or other family member who is disabled. It holds assets for a disabled person without disturbing eligibility for public benefits. Special Needs Trusts are often used to supplement public benefits. The trust pays for items and services that the public benefits system does nto provide.
When does it make sense to set up a Special Needs Trust?
If you have a disabled child, such that your child is unable to work and hold a job or is able to only work part-time and in a limited position, you should consider a Special Needs Trust as part of your estate plan.
Is there a limit to the number of dollars that can be in this trust for the benefit of a disable person?
No. In our practice, we have created trusts that will ultimately hold as little as $30,000 and we have created trusts that hold in excess of $1,000,000.
Does the Special Needs Trust for my disabled child or family member replace my will or other trusts I have set up?
No. Your existing will or trust will continue to hold your assets as long as you live. In most cases, the disabled child’s inheritance will be distributed from either your will or existing trust to the Special Needs Trust at the time of your death.
Will money go into the Special Needs Trust for my child while I am living?
It can if you want to set it up that way. Typically, the trust is funded or receives money only upon your death, but there are people who prefer to set up Special Needs Trusts while alive, especially grandparents or parents of adult disabled persons. You might also decide whether to gift or transfer money into the trust while you are living. Be advised that this raises a number of tax issues about which it is prudent to obtain appropriate advice.
What can the money in the trust be used for?
Generally speaking, money in the trust can be used to pay for items and services that are not provided to the person by the public benefits system. For example, money in the trust can buy the beneficiary a television or pay someone to be the individual’s companion while at home or while on a trip.
Why use a Special Needs Trust? Why not leave everything to my disabled child’s sibling and let them take care of the money?
It is important to have dedicated funds irrevocably devoted to the disabled child. The disabled child’s sibling, however well meaning, could face a divorce or be sued or die before his disabled sibling. In any of these circumstances, the money could be lost and will not be available to the disabled child.
Who should be the trustee of a special needs trust?
The trustee should be someone who is very responsible and who will be devoted to the beneficiary. This is often a relative, although it can be a professional fiduciary or “professional trustee” if no family member is available. This is a very complicated question and many people find it helpful to have a discussion with an attorney who understands these types of trusts.
What happens with money remaining in the trust when the beneficiary dies?
If you create this trust for the benefit of your child, money remaining in the trust goes to individuals you name in the Special Needs Trust. It is up to you. Alternatively, remaining assets can go to your favorite charity.
Does this mean that the state will not be paid back the money for the child’s medical care?
In most cases, this is correct. When parents establish a trust for a child, which is most typical, the state does not get its money back.
If a disabled person inherits money, can a Special Needs Trust help?
Yes. In most circumstances, a disabled individual who is receiving public benefits can shift inherited assets, or other assets he receives, into such a trust without disturbing eligibility for public benefits. The trust will typically be created by the disabled child’s parents or through the Courts. The child cannot establish it himself, although his money can go into it. If this is done, however, the state does have the right to reimbursement for any benefits that it pays.
If you have a disabled child or a loved one who is receiving or may receive public benefits, a Special Needs Trust may be the right choice for you and can serve as an essential part of your estate plan.
CONTACT US TODAY
To speak to an attorney, call Fredrick P. Niemann, at 888-800-7442 or e-mail him at info@njelderlawcenter.com to set up an office consultation at your convenience.