Three Things You Should Know About Special Needs Trusts
If you have a loved one with special needs or severe disabilities, then you might have at some point heard of a special needs trust. These special planning tools are widely regarded as a ‘silver bullet’ for protecting a disabled person’s right to state and federal aid, while preserving any inheritance or assets they may have. But before you run out and spend the time and effort to have a trust drafted for your loved one, there are a few key considerations that a lot of people overlook. Before signing anything or spending your hard-earned cash on an estate plan, make sure you are working with someone you trust. As a faith-based law firm, The Sejour-Gustave Law Firm, PLLC represents families throughout south Florida. Here are a few common things about special needs trusts that many people simply do not know.
#1 The Disabled Person Will Still Need to be Competent to Sign the Document
Perhaps the very first question a responsible attorney should ask when preparing an estate plan for a person with special needs is “can the person fully appreciate what he or she is signing?” This is known as capacity or “competence” in the law. There is a good reason why the AARP recommends strengthening power of attorney and guardianship laws as a fundamental way to reduce exploitation of seniors. People without the ability to understand their own actions, such as those with dementia, severe intellectual disabilities, or brain injuries, may simply not be in a position to create a trust. This is why it is important to act early, before a condition gets worse.
So, what can be done? Just because a cognitively disabled person cannot create a trust, does not mean a loved one is without options. Family members can certainly establish a trust for the benefit of the disabled person, but there are different rules that apply, and it may not always have the same advantages.
#2 The Money Will Likely Go Back to the State
When a special needs trust is created, there are mandatory provisions that create useful “tradeoffs.” For instance, the disabled person may be able to preserve their assets, while simultaneously maintaining eligibility for Medicaid. However, when the disabled individual eventually passes away, any funds remaining in trust will likely have to first pay back any Medicaid funds used for his or her benefit during life. It may still make sense to use a trust, but one should carefully consider the effect of this type of provision.
#3 The Trust Does Not Get Used for Everything
While it may seem like magic to be able to keep your assets and still get aid from the state, the truth is that the trust money cannot be used for all that much. Usually, with special needs trusts, there are limitations on how it can be spent during life. This means it is kept intact for the specific purpose of filling the gaps created by Medicare and Medicaid. Some medical items, adaptive devices, life insurance, prepaid burial and funeral plans, and other similar things can be paid from the trust, but it is often much more restrictive than people think.
How to Know if a Special Needs Trust is Right For Your Family
If you or a member of your family believes that a special needs trust sounds like something that could help you, then you should schedule an appointment to speak with an experienced estate planning lawyer near you right away. Ask questions, get answers, and make sure that it is the right option before putting time and money into it. Call the Sejour-Gustave Law Firm, PLLC, or find us online today.