Special Needs Trust

[Souschef]

I have seen a number of comments on these. I have a granddaughter who was a preemie, is 7 right now, but may have some deficits growing up.
I have a 529 set up right now, but that is it.

I would like to set up something to help her and I need this body's thoughts.
Thank you.

 

[PatSea]

My wife and I have set up a Special Needs Trust for our son. My understanding at the time was that it was very important to have the Trust created by a lawyer who specializes in these trusts. The wording is critically important. I believe they also vary by state. We found a lawyer who specialized in creating these trusts and who also spent years in the social services working with the disabled. It worked well and cost less than $1000.

 

[Souschef]

My wife and I have set up a Special Needs Trust for our son. My understanding at the time was that it was very important to have the Trust created by a lawyer who specializes in these trusts. The wording is critically important. I believe they also vary by state. We found a lawyer who specialized in creating these trusts and who also spent years in the social services working with the disabled. It worked well and cost less than $1000.

That is my take. I do not believe you can do it through an on line service. It requires specialized knowledge.

 

[Drake3287]

Before I go off on an endless post, will this be in the State of California by chance? Every state might be slightly different but they all tend to be a pain in the a$$ to deal with in the end simply because of both federal and state rules that govern them. If you happen to be in California let me know. I have nearly two years of experience in dealing with this as the Trustee of my adult brothers SNT.

And yes, they require an attorney that specializes in these types of trusts. Let me know!

 

[rwdflynavy]

We have a son with autism and have set up two SNT for him (ver specialized situation to require 2 SNT, not typical). Above comments are correct, find an attorney that specializes in them to ensure they are setup correctly.

There are lots of things to know regarding Social Security benefits and such as well as she gets older.

 

[Souschef]

Before I go off on an endless post, will this be in the State of California by chance? Every state might be slightly different but they all tend to be a pain in the a$$ to deal with in the end simply because of both federal and state rules that govern them. If you happen to be in California let me know. I have nearly two years of experience in dealing with this as the Trustee of my adult brothers SNT.

And yes, they require an attorney that specializes in these types of trusts. Let me know!

Thank you, I am in CA.

 

[Splash]

My advice is to use a lawyer specializing in SNT. Also, think beyond the establishment of the trust to who can/will perform trustee duties and where the funds will reside when you die and the SNT gets funded.

When MIL passed away 18 months ago DH and his sister became trustees of their adult brother's SNT. Their brother has physical but not mental disabilities. Due to family dynamics and the complexity of SNTs, DH and his sister were not comfortable performing the trustee duties. We tried to hire an independent entity to take on the trustee responsibilities. Because the value of the trust was considered small (~$200k) we could not find any company willing to do it. Then we discovered a not-for-profit company in WI that specializes in handling SNTs. We hired a lawyer who is on the board of the non-profit and specializes in SNTs. She was awesome but the experience was still frustrating. The way the SNT was originally written, the trustees could not be changed. We incurred legal costs to get the SNT changed to allow the trustees to be modified and make other necessary changes. The name of the SNT had to be changed to adhere to the naming conventions of the non-profit. This also created challenges in getting the Broker to transfer the funds to the non-profit without losing the deferred tax advantages of the IRA and Roth accounts.

When MIL and FIL set up the SNT, I think they were focused on protecting their son's benefits and providing him an equal inheritance. I don't think they understood or considered anything beyond that. If they had, perhaps we could have avoided some of the challenges we faced. However, after much frustration, modest costs, and several months, we now have a situation that is working for everyone.

 

[OldShooter]

My advice is to use a lawyer specializing in SNT. Also, think beyond the establishment of the trust to who can/will perform trustee duties and where the funds will reside when you die and the SNT gets funded.

When MIL passed away 18 months ago DH and his sister became trustees of their adult brother's SNT. Their brother has physical but not mental disabilities. Due to family dynamics and the complexity of SNTs, DH and his sister were not comfortable performing the trustee duties. We tried to hire an independent entity to take on the trustee responsibilities. Because the value of the trust was considered small (~$200k) we could not find any company willing to do it. Then we discovered a not-for-profit company in WI that specializes in handling SNTs. We hired a lawyer who is on the board of the non-profit and specializes in SNTs. She was awesome but the experience was still frustrating. The way the SNT was originally written, the trustees could not be changed. We incurred legal costs to get the SNT changed to allow the trustees to be modified and make other necessary changes. The name of the SNT had to be changed to adhere to the naming conventions of the non-profit. This also created challenges in getting the Broker to transfer the funds to the non-profit without losing the deferred tax advantages of the IRA and Roth accounts.

When MIL and FIL set up the SNT, I think they were focused on protecting their son's benefits and providing him an equal inheritance. I don't think they understood or considered anything beyond that. If they had, perhaps we could have avoided some of the challenges we faced. However, after much frustration, modest costs, and several months, we now have a situation that is working for everyone.

This is a great post to illustrate the difficulties involved and why expert help is needed. Issues with family trustees controlling money for other family beneficiaries are common, often dealt with by having an attorney co-trustee who can be the bad cop. Resignation and replacement of trustees is Trust Drafting 101 type stuff. In our state, the concept of "Trust Protector" has been codified and in our trusts that person can get involved when trustee issues arise. To whom and how often does the Trustee owe an accounting of the assets? ... and more ... and more ...

I haven't seen in this thread a clear statement of the main purpose of a SNT. FWIW, it is to provide financial support to the beneficiary in a way that does not affect any government support that the person is legally entitled to. IOW, the SNT is not construed as an asset of the beneficiary.

 

[Chuckanut]

Check out the tax advantaged ABLE accounts. They are like college savings plans but are for speicial need individuals who will need extra financial help as they age.

https://www.ablenrc.org/what-is-able/what-are-able-acounts/

ABLE Accounts, which are tax-advantaged savings accounts for individuals with disabilities and their families, were created as a result of the passage of the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014 or better known as the ABLE Act. The beneficiary of the account is the account owner, and income earned by the accounts will not be taxed. Contributions to the account, which can be made by any person (the account beneficiary, family, friends Special Needs Trust or Pooled Trust), must be made using post-taxed dollars and will not be tax deductible for purposes of federal taxes; however, some states may allow for state income tax deductions for contributions made to an ABLE account.

 

[rwdflynavy]

We have an SNT and Able account for our DS and they both serve important purposes. It is important to note that Able account balances can be taken to pay back Medicaid after the person's death. That usually doesn't apply to a 3rd party SNT.

All the more reason to talk to a SNT attorney.

 

[Drake3287]

Thank you, I am in CA.

Sorry for the late response. Long story short for me, and it's hard to tell how your situation will be years from now but here's my experience.

When my parents had a family Trust set up for themselves in the event of their future deaths, they had the Estate Attorney write in the need for a Special Needs Trust (SNT) for my adult brother who has a life time history of substance abuse and other related issues. For years this brother has been on both Social Security Disability along with every public benefit California has to offer including free medical and dental care. I unfortunately became the Trustee of this Trust when they passed away.

When my parents set this up years ago they had no idea how difficult these SNT's are to manage. In my case this brother receives only several hundred dollars per month. Problem is, you're not allowed to give cash to people on SNT's. It has to be through something such as a prepaid credit card which they can use for APPROVED purchases. In general, it's not allowed for food and housing simply because that's what his other government benefits are for.

In my case, my brother has failed in properly using this credit card and if and when the State audits this trust, he run's the risk of losing his government benefits which of course are more valuable then this small monthly trust amount.

Beside's having to babysit his spending, he's required to forward all receipts to me for safe keeping in the event he does get audited.

Although paid for by his Trust, I had to seek out an attorney that specializes in SNT's. And not many do simply because they can be confusing and ever changing with government rules. I have a 4 inch thick book that covers the California rules for managing a SNT and I'm constantly needing to look up what approved.

I'm guessing that a SNT for a child would be easy to run vs when they become adults. It also fall's to someone else to run after the parents pass away. If you need the name of this SNT book which my attorney suggested let me know. And unfortunately it's a thankless job as a Trustee.

 

[livingalmostlarge]

Also the able accounts can't go over a certain balance $100k before it impacts SSI and medicaid. So there are things to look over carefully. Also depends on where you live.

 

[Drake3287]

Also the able accounts can't go over a certain balance $100k before it impacts SSI and medicaid. So there are things to look over carefully. Also depends on where you live.

At least in California, $2,000 is the maximum a SNT recipient can have. In my brother's case, his prepaid credit card get's $400. per month. If he allows this balance to increase such as saving for a large purchase, the automatic deposits into this account stop once it reaches this amount.

 

[PatSea]

Our son's Special Needs Trust is administered by The Disability Foundation which is part of the Dayton Foundation, a community foundation. It's called the Ohio Community Pooled Trust.

 

[Souschef]

Thank you for all your responses. Apparently I do not need a SNT, but will investigate the ABLE account.

 

[livingalmostlarge]

At least in California, $2,000 is the maximum a SNT recipient can have. In my brother's case, his prepaid credit card get's $400. per month. If he allows this balance to increase such as saving for a large purchase, the automatic deposits into this account stop once it reaches this amount.

Able is different than SNT. It's a specific type of account that is a SNT but has different parameters. Something to look into and consider but it sounds like your brother is A LOT older and it may not be possible. An ABLE account can have up to $100k before it affect SSI and Medicaid. It also can have up to $500k. But there are rules and if you read about it they are guideline for contribution limitations.

https://www.ablenow.com/?ef_id=CjwK...8G0P68Dx7pJmErmLGA5fTU6NOfLsg0gxoCm2oQAvD_BwE

 

[OldShooter]

Thank you for all your responses. Apparently I do not need a SNT, but will investigate the ABLE account.

With respect, what you need is professional advice. SGOTI here should have convinced you of that.