Fifty-four million Americans suffer a disability. In Florida, 6.2% of children five to fifteen years old have a disability and 4.3% of Miami- Dade County children age five to fifteen have a disability. For parents of those children a stand-alone special needs trust can be a useful tool to ensure their child receives the care they need. The trust provides the family peace of mind their child will have the resources he or she needs even after the parents have passed. Special needs trusts are frequently used to receive an inheritance or personal injury settlement proceeds on behalf of a disabled person or is founded from the proceeds of compensation for criminal injuries, litigation or insurance settlements.
There are a number of reasons that a parent of a child who has a disability might consider using a separate stand-alone special needs trust. The tax consequences of establishing such a trust depend on whether it is revocable or irrevocable. If your family lives in Miami-Dade County, Broward County or West Palm Beach County the stand-alone special needs trust will be governed by Florida Statutes Chapter 376. You should seek the assistance of an experience attorney to be sure the trust complies with Florida laws.
A separate trust should make the process of obtaining approval of the agencies administering the Medicaid and Social Security Income programs easier and quicker. Because a stand-alone special needs trust is designed to benefit only the child who has a disability, the trust provisions should deal only with that child. This makes it less likely that the trust will contain language that causes the trust assets to be countable resources to the beneficiary for Medicaid eligibility purposes than would be the case if the trust also contained assets of the parent, or included the parent’s other children as beneficiaries.
Secondly, a stand-alone special needs trust affords parents a way to keep their estate plan private from governmental agencies. If the parents’ living trust contains information about the value of their estate and is used to hold funds for the child who has a disability, that document must be presented to the reviewing government agencies. Using a stand-alone special trust means the parents only need to disclose what assets are in that trust to the government agencies.
Also using a stand-alone special needs trust provides an easy method for a parent to transfer assets for the benefit of the child who has a disability. It is not unusual for a parent to hold certain assets that the parent wants the child receive in addition to a share of the parent’s estate upon the parent’s death. For example, the parent could have money that a relative wanted to gift to the disabled child. By using a stand-alone special needs trust, the parent can title those assets in the trust so they are already there when the child’s portion of the parent’s estate is distributed to the trust upon the death of the parent. If there is no special needs trust, parents have to amend their estate plan when the relative gives the gift. Extra amendments can be avoided if the assets are already titled in the stand-alone special needs trust.
Additionally, it is possible that family members, such as grandparents, aunts and uncles, or other family friends, may want to make gifts or provisions in their will for the benefit of the child who has a disability. If the parent establishes a separate stand-alone special needs trust, these others can simply name that trust as the recipient of the gift, even while the parent is still living.
To ensure the trust is properly created parents should seek the help of an experienced attorney. As detailed above, there are very important provisions that must be included to create a stand-alone special needs trust. If you or someone you know lives in the West Palm, Fort Lauderdale, or Miami-Dade area and has a need for a special needs trust or similar instruments, the experienced attorneys at Chepenik Trushin will help with these estate planning needs. Please feel free to contact us for an initial consultation.
Sources:
Reaves, Craig, Reaves on Using Stand-Alone Special Needs Trust for Child Who Has a Disability, Emerging Issues Copyright 2011, Matthew Bender & Company, Inc., December 15, 2011 U.S. Census 2000, American Community Survey 2007 Wikipedia