Long Island Special Needs Planning Attorney
It is essential that you carefully prepare your estate plan when you or a loved one has a disability. A special needs trust is a trust that is established for a person with special needs that receives government benefits or may have the need for government benefits in the future.
While owning a home, a vehicle, or normal personal effects will not affect a disabled person’s ability to receive Supplemental Security Income or Medicaid benefits, cash in the bank will adversely affect those benefits. Maintaining assets in a valid special needs trust, instead of in the disabled person’s own name, the disabled person can receive benefits while still enjoying additional funds held by the trust. Since the person with special needs has no direct control of the assets placed in a special needs trust, the assets in the trust are disregarded by Medicaid and SSI for purposes of program eligibility.
If you have a disability that would entitle you to government benefits, you may benefit from special needs planning. If you are already receiving government benefits and receive money either through an inheritance or lawsuit settlement or judgment, you may need special needs planning to ensure that your benefits are not jeopardized.
If you have a loved one with special needs, then setting up a special needs trust as a part of your estate planning can help you ensure your loved one is well taken care of after your death and prevent undue hardship to him or her. Without any planning, if the person who inherits your estate by law is receiving government benefits, then when he or she is mourning your loss after you die, your loved one will be confronted with the risk of losing his or her benefits and the hardship of dealing with special needs planning in what is already a difficult time.
Rather than leaving assets directly to your loved one, disinheriting him or her completely, or worse of all, not planning at all, property can be left to a special needs trust, where it is overseen by a trustee of your choice, ensuring your loved one is left with money while preserving his or her government benefits. Therefore, it is important for not only a person with a disability to plan for themselves, but their relatives must be sure that their own estate plans include special needs planning to ensure that a disabled person’s benefits are not jeopardized and he or she does not suffer undue hardship in a time of loss.
If you or a loved one has a disability, it is important that you have a highly experienced attorney in special needs planning who can help you create the best plan, which may include a special needs trust specific to your unique situation. When you contact Esther Schwartz Zelmanovitz, PLLC, you will speak to a highly knowledgeable attorney who will carefully consider all the specifics of your situation. Attorney Esther Zelmanovitz is passionate about finding strategic, creative solutions to her clients’ problems, representing those who need guidance to help them through a confusing or complex legal situation. Esther Zelmanovitz will help you get your affairs in order while ensuring you and your loved ones are protected at the same time.
Determining Which Special Needs Trust is Right for You
Essentially, there are two types of special needs trusts: a first-party special needs trust, and a third-party special needs trust.
First-Party Special Needs Trusts
A first-party special needs trust is funded with a disabled person’s own funds, while a third-party special needs trust is funded with someone else’s money to provide for the person with a disability, ensuring he or she is taken care of after the death of the caretaker. The most important difference between a first-party special needs trust, and a third-party special needs trust is what happens to the property when the beneficiary of the trust dies. A first-party special needs trust must include a “pay-back” clause, requiring the trustee to use the remaining assets in the trust to reimburse Medicaid for the benefits paid out to the special need’s beneficiary.
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Why Should I Establish a Special Needs Trust?
There are a number of compelling reasons for establishing a special needs trust for a disabled loved one or for oneself. These reasons include:
- Allows a disabled loved one to receive lifestyle supplementation without jeopardizing government benefits. A disabled person can obtain basic support funds from Supplemental Security Income, which then leads to eligibility for Medicaid and other government programs. SSI, however, will only cover essential expenses, and while a parent might want to supplement their child’s lifestyle, SSI imposes strict limits on assets and income. The solution, then, is to place assets in a special needs trust, so those assets will not be counted as income for determining eligibility for benefits.
- Allows other people, such as grandparents, to contribute to the care of an individual with special needs. Establishing a special needs trust allows others who also want to help the disabled person to make annual gifts up to $15,000 per year, without triggering a generation-skipping tax or a gift tax.
- Allows you peace of mind, knowing the assets will be used as you intended. When you create a special needs trust, you can rest easy, knowing your disabled loved one will be taken care of long after you are gone. When you leave assets to another person with instructions to take care of the special need’s individual, many things could happen to prevent that. The person may not honor your request, or even with the best intentions, the assets could be lost to creditors, in a divorce, or the person could die prematurely, resulting in the funds being inherited by someone else.
- Allows you to clearly identify distributions. When a special needs trust for your child is established while you are alive and able to administer the trust, the trust can be used to pay the necessary expenses for your child. After your death, the named successor trustee can refer to your prior payments to determine the appropriate use of the funds.
- Allows you to fund the special needs trust in the way you choose. Securities, cash, and other resources, such as a second-to-die life insurance policy, can all be used to fund the special needs trust. A retirement account can also be used to fund the special needs trust, however, it is important that you speak to an attorney who can advise you on the most tax-efficient way to transfer retirement funds to a special needs trust.
- Allows benefits from a personal injury settlement to be maximized. When a disabled child receives a settlement from a personal injury claim, the person can have the settlement directed to a first-party special needs trust; this allows the individual to receive regular payments for life, while still qualifying for public benefits.
- Preserves your inheritance and your Medicaid and/or Social Security Income benefits. When a disabled person receives an inheritance outright, the person can direct the inheritance to a first-party special needs trust; this allows the individual to enjoy the inheritance for supplemental needs while avoiding loss of public benefits.