Life Planning & Supplemental Needs Trusts

How to help those that have special needs in case you aren’t there to care for them

A Shifting Dynamic Requires Better Life Planning

It is undeniable: The landscape of the “American family” has drastically shifted in the past few decades. Part of that shift involves families acknowledging and living with certain medical diagnoses that our society once ignored or did not properly recognize in years past. When people are living with special needs conditions, creative crafting in life planning is essential. Laws can be incredibly slow to answer the call in most situations, as we all know; thankfully, having creative attorneys and financial advisors who know the environment can empower you right now to develop a life plan that suits your needs.

Question: What does life planning mean?

I use this term to cover a whole collection of common needs – current investment strategies; retirement objectives and tools; long-term care considerations; estate mapping and planning; and enriching the generations you have helped create. This particular article focuses on something you might have heard of in discussions of wills and trusts: a special needs trust also called a supplemental needs trust (SNT). SNTs have a straightforward purpose; their complexity is in the legal drafting and in management of the SNT. I am not providing you with legal advice in this article, but I can try to answer some common questions you have. If you find you would like to learn more, feel free to reach out.

Question: What are trusts?

Answer: For any trust, regardless of the purpose, you have four terms you should know:

1. Trust: A legal document that acts as an instruction manual for what is included in the trust, informing others (on a need-to-know basis) what assets are in the trust, how the trust is to be managed, and who gets to receive from the trust.
2. Grantor: That’s typically you, but it is generally the person who establishes the trust.
3. Trustee: That may also be you, but sometimes you need to have another person – or a professional entity – be the trustee, as a trustee needs to be able to protect and manage the trust assets and distribute the assets according to the instructions of the trust document.
4. Beneficiary: That could also be you, but may also be your spouse, children, other loved ones, businesses, or charities.

Question: Should SNTs be a part of my life planning?

Answer: Possibly. Do you have adults or children in your life – related or not – that you intend to help protect or enrich during their lifetime? Do they need supervision and accountability when it comes to handling finances? Are they likely going to need to qualify for state or federal benefits to cover the costs of their long-term care as they age (including Medicaid and Social Security Income)? If you just gave a nod to each of those scenarios, you will want to consider making that person the beneficiary of a trust you create. You also may need to create one with yourself in mind, if you know your circumstances will put you in a position to need that kind of management now or in the future.

Question: What are SNTs exactly going to do for my situation?

Answer: SNTs give you the chance to provide for people in your life without making it impossible for them to qualify for governmental benefits that can help cover their assisted living needs. The federal and state systems want to ensure they help people that cannot help themselves, but their rules are broad and do not care about specific situations. You may want to ensure your loved one receives what you have worked hard to build for them, but you also want to make sure it doesn’t put them in a position where they no longer qualify for the benefits they desperately need. SNTs do just that, providing money for the benefit of your loved one, but by way of special rules that the trustee must follow. One typical rule for most SNTs is that any cash distributed from the trust cannot go directly to the beneficiary, but rather must go to the third parties that are at work in their lives related to housing, caregiving, professional services, and even motor vehicle and personal property purchases.

Need help?

If you have someone in your life with special needs, a special needs trust might be a great tool to have in your life planning portfolio. Consider talking with a trusted attorney or financial advisor to learn more about whether this product can serve you well. Not everyone needs this special type of trust, but if you do, it’s vital for us to sit down and map out what your plan can look like. As you know, you can’t control the future, but we can help you prepare for it. Feel free to reach out to us on our website Morgan & Perry Law, or give us a call to see if we can help you arrange what you need to bring you and your family peace of mind.