Special Needs Planning

What is Special Needs Planning?

Special needs planning combines both legal and financial planning to ensure that family members with special needs or a disability have sufficient resources for their lifetime care and do not become ineligible for government benefits to which they may be entitled.

What is a Special Needs Trust?

Special needs trusts (also sometimes referred to as “supplemental needs” trusts) allow a disabled beneficiary to receive gifts, lawsuit settlements, or other funds and still be eligible for certain government programs. Special needs trusts are drafted so the funds are not considered an “available resource” in determining eligibility for public benefits. As the name implies, special or supplemental needs trusts are not designed to provide basic support, but instead to pay for comforts and “luxuries” that are not available from public assistance. These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life. (However, the trustee may use trust funds for food, clothing and shelter if the trustee decides doing so is in the beneficiary’s best interest despite a possible loss or reduction in public assistance.)

Most often, special needs trusts are created by a parent or other family member for the benefit of a disabled loved one, whether that person is a minor or adult. Such trusts also may be set up in a Last Will or Living Trust as a way for an individual to leave assets to a disabled relative. Sometimes, the disabled individual can create the trust himself, depending on the program for which he or she seeks benefits.

Special needs trusts generally fall into two categories—first party (or self-settled) trusts and third party trusts. Within each of these categories are subcategories of trusts.

What are the different types of Special Needs Trusts?

First Party Trusts

A first party or “self-settled” trust is one that is established with the trust beneficiary’s own money. Generally this money will be received as the result of an accident or medical malpractice lawsuit, or unexpected gift or inheritance.

Each public benefits program has restrictions that special needs trusts must meet so the beneficiary’s continued eligibility for public benefits is not jeopardized. Medicaid and SSI both have stringent income and resource restrictions making it difficult for a beneficiary to have substantial assets and still retain eligibility for benefits. But, both programs have “safe harbors” permitting the creation of a special needs trust. These safe harbor trusts fall into 3 primary types; Disability or d4A trusts, Qualified Income or d4B trusts and Pooled or d4C trusts.

All first party trusts have mandatory “payback” provisions which require the trust to reimburse the governmental agency for benefits provided by Medicaid. This is their primary disadvantage.

Disability or (d)(4)(A) Trust

The first of the self-settled trusts is called a Disability or d4A trust referring to the authorizing Federal statute. This trust will be established with the assets of a disabled individual under age 65 by the disabled person, a parent, grandparent, legal guardian or by court order. The trust assets must be used for the sole benefit of the beneficiary and requires a payback to Medicaid at the end of the beneficiary’s lifetime for any benefits that may have been received. Remaining assets may be distributed to surviving family members.

Qualified Income or (d)(4)(B)Trust

The next safe harbor trust is the Qualified Income or d4B trust. This trust is sometimes also referred to as a Miller Trust or QIT Trust. The Qualified Income Trust or QIT is used for medicaid nursing home related programs where the applicant is over the income limitation. The excess income is placed in the QIT and the individual remains eligible for their government benefits. A QIT may be created by the beneficiary, the beneficiary’s spouse (without a power of attorney), another individual under the authority of a power of attorney or by court order. The only permitted distributions from a QIT are the applicant’s Patient Responsibility (the portion of their income they must pay to the facility where they reside), a Personal Needs Allowance (currently $105), or Community Spouse Income Allowance. All funds remaining in the QIT at the end of the beneficiary’s lifetime are retained by the State.

Pooled or (d)(4)(C) Trust

The last of the safe harbor trusts is the Pooled or d4C trust. These trusts pool the resources of many disabled beneficiaries, and the trusts assets are managed by a non-profit organization. Unlike individual disability trusts (d4A), which may be created only for those under age 65, under current Florida Medicaid law Pooled Trusts may be created for beneficiaries of any age and may even be created by the beneficiary, if competent. In addition, although technically a “payback” trust, at the beneficiary’s death Medicaid does not have to be repaid as long as the funds are retained by the Poole Trust organization for the benefit of other disabled beneficiaries.

Pooled Trusts have recently come under attack by the Social Security Administration for over age 65 beneficiaries. As a result, an over age 65 applicant for SSI benefits cannot effectively use a pooled trust to qualify for SSI benefits.

Third Party Trusts

Third Party Trusts are trusts created with the assets of someone other than the trust beneficiary—a third party. Third party trusts can be created as Stand Alone trusts of as Stand By trusts. A primary benefit of a third party trust is there is no Medicaid payback requirement at the end of the beneficiary’s lifetime. Third Party Trusts are the most desireable for special needs planning because all remaining trust assets may be left to family members or charities of the Trustmaker’s choice.

Stand Alone Trust

A Stand Alone trust is created as a form of Living Trust—while the Trustmaker (also referred to as a settlor, trustor or grantor) is living. A Stand Alone Trust can be revocable (capable of being amended or revoked) or irrevocable (cannot be amended or revoked). The type of Stand Alone Trust that is best will depend on the needs and circumstances of the individual Trustmaker. Each Stand Alone Trust can be customized to the needs and desires of the Trustmaker to ensure the trust beneficiary is getting the best possible quality of life. Another possible benefit of the Stand Alone Trust is if the law were to change and the trust was already in existence, the likelihood is it would still be effective despite the change to the law.

Stand By Trust

A Stand By trust, also known as a testamentary trust, is created as part of a Last Will or Living Trust, generally a parent or family member of the disabled individual. Like the Stand Alone Trust, it can be customized to meet the needs and desires of the Trustmaker regarding the quality of life of the beneficiary. Possible drawbacks to Stand By trusts include the delays associated with probate for those created in a Last Will and there is no assurance the laws won’t change in a way that affect the viability of a Stand By trust.

Special Needs Planning Process

Educational Workshop (Optional)
Join us in our classroom, for an interactive workshop designed to educate families about general estate planning principles, the federal estate and gift tax structures, and the importance of implementing and maintaining a relevant estate plan. We highly recommend you attend an educational workshop, but it is optional. Click here to see when our next estate planning workshop will be held. (Complimentary)

Discovery and Decision Dialogue
Discuss client and attorney commitments; you teach us about you and your family. We teach you about the law and how it affects your family. Then, together we can explore optimum planning solutions. (One and a half hour one-on-one consultation. Consultation Fee $200.00 – Applied to planning fee.)

Counselling and Design Meeting
We will work with you, your family, and advisors (optional) to custom design your plan. (1/2 of your fee is due.)

Signing Ceremony
We review and sign all drafted documents. (Remaining 1/2 of your fee is due.)

Asset Ownership and Protection; Updating, Education, Maintenance & Support can be provided at an additional fee.

Estate Security Plan (ESP)

You can’t predict the future, but you can plan for it!

Our ESP Program is designed specifically for those clients who want an updating, education and maintenance program to keep their estate plan relevant throughout the years. As a member of our ESP Program, you are entitled to assistance and education regarding the funding of your trust so your assets are titled correctly and your plan works effectively. You will also be invited to our Annual Client Meeting to hear updates on our firm and the law. Additionally, we offer family educational workshops for your beneficiaries and personal representatives so that they will know what to expect when administering your estate. ESP members are also encouraged to review their planning every three to five years and if there are changes that need to be made, you can update your plan at no additional cost.

Your participation in the Estate Security Plan includes all of the following services and benefits at no additional charge:

Funding/Asset Integration:

Asset Training Meeting – Financial Funding Forum™
To teach you the importance of fully integrating your assets with your trust instructions.

Asset Integration Assistance
To assist you as you acquire new or additional assets (up to 10 assets included – additional charge for additional assets).

Annual Asset Verification
To ensure that your trust remains fully funded.

Personal Instructions / Customized Instructions
For Health Care, Trustee Instructions for Children, Personal Property Memorandum, Memorial Instructions.

Education:

Nuts ‘N Bolts I
(Successor Trustee Training) – to educate you and your successors regarding roles and responsibilities as a Successor Trustee.

Nuts ‘N Bolts II
(Inheritance Training) – to educate beneficiaries of the long-term benefits of retaining assets in trust, including creditor protection, remarriage protection, divorce protection and values promotion, to name just a few.

Specialty Workshops
Check our website for our specialty workshops such as Retirement Planning, The Truth About Medicaid Planning, Planning for your Pets, Women In Transition, Special People Special Planning and What to Do When Someone Dies.
We also plan additional specialty workshops on topics of interest for ESP clients only.
Maintenance (Relationship)

Telephone Conferences and Email Correspondence
To provide support and assistance when needed or required.

Document Amendment Service
To respond to changes in your life: your family or personal situation, your lawyers experience, and your legacy.

Annual Client Meeting
To share with you the status of the firm and changes in the law that may affect your plan.

Client Update Program (CUP)
A periodic (every 2 to 3 years) update program to ensure that you are educated and your estate plan is current with changes in the law, changes in our experience and changes in your legacy. The program is conducted in a small group setting. For an individual update program, see Personal Update Program (P.U.P – $500).

Community Builder™ Programs
Fun events intended to include family members and provide an opportunity to share and develop our relationship on an informal basis. Events have included zoo outings, picnics and tailgate parties.

Family Focus™ Newsletter
To keep you updated on changing laws and upcoming events.

Family Meeting
To share your vision and your plan with your family.

Settlement:

Reduced fee settlement services
To assure your successors have disclosed and controlled settlement costs.

Survivor Support Program
To ensure your survivors have continued support, education, and counselling in their time of need. Update surviving spouse planning.

Additional Services:

The following services are offered to Estate Security Plan participants at a reduced fee.

Personal Counsel and Review ($500)
An individual one-on-one counselling review to discuss major changes in your personal or financial situation, such as divorce, retirement, inheritance, or other changed circumstances.

Personal Update Program (PUP – $500)
A periodic (every 2 to 3 years) update program to ensure that you are educated and your estate plan is current with changes in your life, changes in the law, changes in our experience and changes in your legacy. This program provides for personal one-on-one interaction with our attorneys, conducted in an individual setting.

Advanced Planning (10% discount)
Including Stand Alone Special Needs Trusts, Stretch Inheritance Trusts (IRA Trust), Charitable Trusts, Irrevocable Trusts, Irrevocable Life Insurance Trusts (ILIT), Family Limited Partnership and Family Foundations, Business Succession and Exit Plans.