Planning Tips for Special Needs Trusts

I would like to take this opportunity to thank the wonderful organization Acadiana Families Helping Families for inviting me to speak at their 2016 Family Forum “Your Journey…Guiding You Through” in Scott, Louisiana on April 28th. We had a great audience who asked many questions about planning for a loved one with special needs. The forum is the basis for this blog post about planning tips for special needs trusts.

Use care when selecting a Trustee. Loved ones or family members can manage the special needs trust while alive and well if they are willing to serve and have proper training and guidance. Once the family member or loved one is no longer able or willing to serve as trustee, they can choose who will serve according to the instructions provided in the trust. Alternatively, the trust document typically provides for a successor Trustee. Families or loved ones who create a special needs trust may choose a team of advisors and/or a professional trustee to serve. Whoever they choose, it is crucial that the trustee is financially savvy, have a basic understanding of means-tested benefits, well-organized and of course, ethical.

Invite others to contribute to the special needs trust. A key benefit of creating a special needs trust now is that the beneficiary’s family can make gifts to the trust or remember the trust as they plan their own estates. For example, these family members can name the special needs trust as the beneficiary of their own assets in their revocable trust or will, and they can also name the special needs trust as a beneficiary of life insurance or retirement benefits. Unfortunately, many extended family members may not be aware that a trust exists, or that they could contribute money to the special needs trust now or as an inheritance later.

Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (for example, a specially equipped van), training and education, insurance, transportation and essential dietary needs. If the trust is sufficiently funded, the disabled person also can receive funds to be used for quality-of-life-enhancing expenses: the types of benefits families currently provide to their child or other special needs beneficiary. However, the rules often change on the types of expenses that can be paid for by a special needs trust. Therefore it is important to continually seek advice when drafting or administering a special needs trust.

A special needs trust does not have to be inflexible. Unfortunately many special needs trusts are unnecessarily inflexible and generic. Although an attorney with some knowledge of the area can protect almost any trust from invalidating the beneficiary’s public benefits, many trusts are not customized to the particular beneficiary’s needs. Thus the beneficiary fails to receive the benefits that the parents or others have provided while they were alive. For this reason, it is critical that you seek the advice of an attorney with experience in the area of special needs planning.

Not all special needs trusts require a pay-back provision. Another frequent mistake occurs when the special needs trust includes a pay-back provision rather than allowing the remainder of the trust to go to others upon the death of the special needs beneficiary. While these pay-back provisions are necessary in certain types of special needs trusts, an attorney who understands this area and knows the difference can save family members and loved ones hundreds of thousands of dollars, or more.

If you have questions about planning for a loved one with special needs, contact Houma estate and elder law attorney, John Sirois. Contact John by phone (985) 580-2520 or by email. Visit John’s website for more information. To order a copy of John’s book, Louisiana Retirement and Estate Planning, click here.