Matthew J. Tobin

Whenever I am setting up an estate plan, I make it a point to ask my clients about any special needs of their children. Over the years I have been surprised at how many of my clients have children who, in one way or another, will need long-term management of the assets that they will eventually inherit. Children who suffer a disability of any kind or the effects of substance abuse, or simply are unable to hold on to money—whatever the case, many of them really end up needing help.
In severe cases of disability, your special loved one might be on SSI, or Social Security Income, and possibly even on Medicaid. Even if you’re helping the child, too, Medicaid can sometimes step in in dire cases and help with, for example, lifelong medication. Parents have to be very careful about how they leave money to children on SSI or Medicaid who will need financial watching over later on, when they are not here. Leave such a child, say, $50,000, and that child might lose his or her federal subsidies and no longer be able to go on once the inheritance is gone.
The answer to this is a special needs trust.
Under the law, if certain limitations are built into a trust they will make it impossible for creditors to reach the funds in the trust. For example, if I am the beneficiary of a trust that holds the $50,000, but I’m not the trustee, then I have no control or management over this money. Only the trustee has the power to give me money. Because I have no legal right to demand it, my creditors can’t take the money I owe them from the trust. Therefore I’m not really considered the owner of the $50,000, and it can’t be considered my asset in determining my eligibility for government assistance. In some states laws have been passed that take this basic trust principle and use it specifically to allow money to be held in trust for the benefit of a developmentally disabled person while still allowing that person to retain all public benefits.
The greatest protection is provided for someone who suffers a developmental disability, one that impairs his or her ability to provide self-care and custody, which constitutes a substantial handicap. The primary purpose of these special needs trusts is to provide that person with a lifelong supplemental and emergency fund of assistance. Currently there exist basic living needs, such as dental care, which public benefit programs do not provide. While the parents are alive, they often provide for these needs when necessary. In the interests of love, human dignity, and humane care, they want to keep providing for these needs after they’re gone.
Because the cost of care for developmentally disabled people is very high, the assets in trusts set up to provide for their care don’t count against the beneficiary in qualifying for government assistance. The way they work is that the trustee is directed to pay for the beneficiary’s special needs, which is to say, the requisites for maintaining the beneficiary’s good health, safety, and welfare when, under the discretion of the trustee, such requisites are not being provided by any public agency, office, or department of the state or of the United States. “Special needs” include, but need not be limited to, dental care, special equipment, programs of training, education and habitation, travel needs, and recreation.
If you are trying to protect someone who is not developmentally disabled but receives SSI, the same type of planning is advised but may not be protected to the same extent and may require more careful work on the part of the trustee. But when you love a special person, you already know there are more Considerations needed at all times, and you probably don’t mind the technicalities, if you know they offer the greatest hope of protection for your special one.