Maroney Law Blog

Thursday, April 7, 2011

Special People Have Special Needs

Many of our clients who have children, whether minors or adults, with special needs (mentally retarded, autism, Down’s syndrome, etc.), are specifically concerned about what will happen to the child after they pass away.  Put another way, they are fully engaged in taking care of this special needs person, but must consider what will happen when they are no longer around.

The case of a special needs person requires more than simply naming a guardian for your child.  This is something that will have a major impact on the life of this special needs person who not only needs someone to take care of them but needs someone to take care of any resources that they have in such a way that they do not disqualify the special needs person from government benefits to which they would otherwise be entitled.

For those of our clients who have a loved one with special needs we offer advice, guidance, and preparation of specific documents to address all of these needs.
First, if you have a loved one with special needs who is receiving benefits under a government entitlement programs, it is important to note that these programs are asset based, and can be lost if the special needs person has an amount of money that exceeds the government limit.  Sometimes the government programs limit the resources of the recipient to as low as $2000.  Leaving assets to such a person without consideration of these limitations can cause the special needs person to become disqualified for benefits until they use up all of their newly inherited assets.  Others who do know something about these issues often determine it best to disinherit that loved one or possibly leave his or her share to another loved one who promises to take care of the special needs person.  This is a very dangerous maneuver because the future of the person holding the money is uncertain and if they pass away, the monies will be distributed as part of their own estate.  If they get divorced, the monies could be subject to the taking by the divorcing spouse. Likewise, if they declare bankruptcy or get sued for a personal injury they might have caused someone, the assets of the special needs person may be in jeopardy.
A more dependable solution to these problems is what is known as a Special or Supplemental Needs Trust.  These special trusts allow monies to be held for the benefit of a special needs person in such a way that it will not disqualify that person’s eligibility for government assistance programs.  Of course, the details are critical, but in summary the concept is that the monies held in trust must be used to “supplement” but not replace the government benefits that are being provided to the special needs person.  In essence, the monies can be used for almost anything that would make the special needs person’s
life better, so long as the monies are not used to replace the government benefit that is being provided for that person.  For example, if shelter is provided for the special needs person, the monies cannot be used to buy a house.  However, if transportation is not provided as part of the government program, the monies out of the Special Needs Trust can be used to purchase transportation assistance.
There are several types of Special or Supplemental Needs trusts, and a complete explanation of each might be best covered in future blogs.  However, in summary, the differences are as follows.
A Third Party Supplemental Needs Trust is a trust set up during the lifetime by the grantor or maker of the trust.  The monies are not and never were in the name of the special needs person, but rather are coming from a third person who is funding a trust for the special needs person.  These trusts do not have any “pay back” provisions, meaning that at the end of the special needs person’s life, any money left in the trust can go to beneficiaries designated by the grantor.  There is no pay back to the government for benefits rendered to the special needs person.
Another type of special needs trust is known as the First Party Special Needs Trust.  This is when the special needs person at issue uses his or her own monies to fund the trust.  These funds often come from a law suit for personal injuries that caused the person to have special needs and issues about government benefit programs.  The money from the law suit can be used to fund the First Party Special Needs Trust that will be used in the same way as the above referenced Third Party Trust except there is a “pay back” provision.  At the end of the special needs person’s life, any monies left in the trust must be paid back to the government to the extent that the government provided benefits.  If there is any remainder after the government if paid back, then monies can be distributed to the beneficiaries set forth by the special needs person when he or she established the trust.
Finally, a Testamentary Supplemental Special Needs Trust is a trust that is set up in a person’s last will and testament.  This trust basically allows the person drafting the will to establish that if a certain person is on special needs government assistance at the time of their death, his or her share of the estate will be placed into a Special Needs Trust and used to supplement but not replace the government benefits of that person.
Future blogs will address funding a Special Needs Trust (using specific monies, life insurance policies and even real estate), as well as how to pick a special needs trustee, and the specific tasks that a special needs trustee must be aware of.  Meanwhile, please feel free to contact us for a consultation about this, or any other matter.

Based in Melville and Garden City, New York, the attorneys at the Law Offices of Maroney Associates, PLLC assist clients throughout Nassau County, Suffolk County, Queens, and the cities of Mineola, Hempstead, New Hyde Park, Franklin Square, Williston Park, Queens Village, Melville, Huntington, Farmingdale, Patchogue and Uniondale, NY.

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