Special Needs Planning

Special Needs trusts (also known as "supplemental needs" or "Safe Harbor" trusts) allow a disabled person to receive gifts, lawsuit settlements, or other funds and not lose eligibility for government programs such as Medicaid and Supplemental Security Income (SSI). Special Needs trusts are drafted so that the funds will not be considered to belong to the beneficiary in determining eligibility for public benefits.

Special Needs Trusts are designed to be supplemental rather than to provide basic support. Their purpose is to pay for comforts and luxuries that could not be ordinarily paid for by public funds. These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life. While a trust can grant the trustee with discretion to provide basic as well as supplemental needs, great care must be taken in the drafting so that benefits are not inadvertently removed due to the existence of the trust.

Supplemental needs can include medical and dental expenses, specialized equipment such a specially equipped vans, training and education, insurance, transportation, electronic equipment and appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses.

There are two basic types of Special Needs Trusts: self settled or grantor trusts, and third party trusts. A self-settled trust is frequently established by individuals who become disabled as the result of an accident or medical malpractice and later receive the proceeds of a personal injury award or settlement. A third party trust is usually created by a parent or other family member for a child with special needs, either during their life or set up in a will.

While relatively simple in concept, the drafting and administration of Special Needs Trusts is subject to numerous complex administrative regulations, and Special Needs Trusts have varying tax implications for the beneficiary. If you are interested in, or already the trustee of a Special Needs Trust, you may be interested in Managing a Special Needs Trust: A Guide for Trustees, 2012 Edition by Barbara D. Jackins et al, available at Amazon. Timothy E Williams is experienced at both the drafting and administering of Special Needs Trusts.

Congress recently passed the ABLE act, and Governor Inslee signed it into law in Washington on May 4, 2015.  While this is a tremendous accomplishment, like all things, no one thing will be right for everybody. A properly drafted and implemented Special Needs Trust may still be a better vehicle for asset protection for those with disabilities. For an excellent article on this see SNTs, Qualified Disability Trusts and ABLE Accounts: Slashing Tax Liability at The Special Needs Alliance, which is also a great resource.

Attorney Timothy E. Williams serves clients in Tacoma and Pierce County in Washington State.

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