What Expenses Can a Special Needs Trust Cover?

Trusts play a crucial role in estate planning, particularly for individuals with unique care requirements. They are sometimes referred to as trusts for people with special needs and offer families a secure and protected method to ensure the long-term well-being and financial stability of their loved ones who have special needs. However, complications and conflicts may arise when government assistance or benefits intersect with these special needs trusts. It’s also important to have a good understanding of the various expenses that can be covered by such trusts. Therefore, it is advisable to seek guidance from a legal professional before establishing a Special Needs Trust and managing it in the future. For more information, please don’t hesitate to contact an experienced special needs planning attorney at the Choi Law Firm.

Special Needs Trusts Overview: Empowering Individuals with Special Needs

Medicaid, SSI, and Social Security Disability payments hold immense significance for numerous families and children, as they are primarily granted based on financial need. However, exceeding a certain threshold of assets or income may jeopardize one’s eligibility for these crucial financial lifelines.

To address this challenge, Special Needs Trusts (SNTs) have been established, often referred to as SNTs for short. These trusts serve the dual purpose of providing supplementary support to individuals with disabilities while ensuring their continued qualification for essential government benefits. SNTs are instrumental in covering expenses that fall outside the scope of other government assistance programs, offering a comprehensive safeguard for an individual’s financial well-being.

Moreover, SNTs become especially valuable when the beneficiaries, including disabled children, are unable to independently manage their assets. By employing a Special Needs Trust, the beneficiary’s assets can be protected while preserving their eligibility for government benefits. This requires a thorough understanding of the law and the intricate interactions between trust disbursements and government support. For personalized guidance on how to secure your family’s financial well-being and that of your disabled family member, please reach out to the Choi Law Firm at 201-613-5557.

While some individuals might contemplate leaving their assets to family members with the hope that they will manage a disabled child’s share responsibly, others may choose to establish a Special Needs Trust (SNT) voluntarily, even if it is not mandatory. In the former scenario, it’s crucial to set aside funds for a disabled child in an irrevocable manner to account for potential changes in the relative’s financial situation and prevent unintended misuse of the funds. In the latter situation, an SNT may not be a necessity, as is the case when an individual receives a substantial court settlement due to an unforeseen disability. In such instances, since compensation has already been received, an SNT becomes redundant. Special Needs Trusts are primarily designed for individuals who rely on government assistance and face challenges in maintaining long-term employment.

Covered Expenditures in Special Needs Trusts

A SNT can cover a range of expenses that enhance the quality of life for beneficiaries. These include:

• Insurance premiums, such as medical, dental, life, and automobile insurance.
• Accessibility improvements, home renovations, and furnishings.
• Costs related to internet access and phone services.
• Expenses for employment coaching, school tuition, and summer camp fees.
• Clothing and household appliances.

SNTs are versatile in financing items that aren’t essential for survival but significantly improve the beneficiary’s well-being.

It’s crucial to note that SNTs can be used for necessities like food and shelter. However, utilizing SNT funds for these essentials may lead to a reduction in government benefits for the recipient. For a comprehensive evaluation of which expenses to cover with your SNT and which to address through government benefits, please reach out to the Choi Law Firm.

Understanding Incompatible Expenses in Special Needs Trusts

Special Needs Trusts can’t be used to cover basic needs, including:

• Groceries and utilities.
• Rent and mortgage payments.
• Real estate taxes.
• Insurance for private residences (rented or owned).
• Cash payments, typically in the form of an allowance.

Additionally, essential items like wheelchairs, mechanical beds, accessible vans, specific therapies, and life-enriching recreational or cultural events aren’t typically covered by SNTs. Distinguishing between supplemental demands and essential needs can be challenging, but the knowledgeable estate planning attorneys at the Choi Law Firm can assist in crafting a precise and comprehensive financial plan for your loved ones’ security.

Trustee’s Discretion in SNT and Government Assistance

Just like any other trust, Special Needs Trusts appoint a trustee, administrator, or executor to manage the beneficiary’s funds and trust. The trustee should be someone accountable to the beneficiary and committed to their welfare, whether a family member or a professional trustee.

Trustees of SNTs exercise their best judgment when making spending decisions on behalf of the beneficiary. Regular consultations with an experienced attorney are essential to ensure the proper management of the SNT, meeting the beneficiary’s needs, preserving eligibility for government benefits, and accessing those benefits.

Connect with the Choi Law Firm for a Comprehensive Consultation

Establishing a Special Needs Trust correctly is a complex process, with errors potentially harming your disabled loved one or the recipient. Multiple factors come into play, such as public benefits eligibility, tax considerations, and the broader impact on your financial and estate planning.

The experienced special needs planning lawyers at the Choi Law Firm are ready to assist. They can provide a detailed analysis of your situation, help you understand your requirements, build a robust financial plan and trust for your family, and guide you through the entire process. Don’t delay—contact us today for immediate assistance.