Life planning takes many forms for many people. And while we most often hear of efforts taken to care for aging family members or minor children, family members with special needs – whether mental or physical – may also benefit greatly from a little advanced planning. So what steps should legal guardians take to ensure that a special needs child is taken care of after the death of a caretaker? What should a family member do to ensure that a disabled adult under his or her care will be provided for?
The Wade Law Firm, PLLC, is here to help. We look forward to serving you in the Ridgeland, Metro Jackson, Central Mississippi and the Mississippi Delta areas.
First, know that contributions of assets to a disabled person – whether property or money – may affect that loved one’s eligibility for certain public benefits, such as disability income or unemployment compensation benefits. In short, new income for the disabled individual may be treated as evidence of a reduced need for public assistance.
But what if you’d like to ensure that a disabled loved one is able to benefit from a portion of your estate when you are gone?
Consider a Special Needs Trust.
Set up with the help of an experienced attorney, a Special Needs Trust is established for the sole benefit of a disabled individual who is under the age of 65 by a parent, grandparent, legal guardian, or a court of law. This trust may contain assets contributed both by the disabled person and others, and is considered an “excepted trust” in that income and assets held in this trust are treated differently than others.
Importantly, this excepted status means that a Special Needs Trust may also benefit the disabled individual without affecting his or her receipt of public benefits – IF it is created and administered in accordance with Mississippi Medicaid requirements.
Here are the basics:
First, to qualify as an excepted trust, the trust account must be established for a disabled individual, as defined in Section 1614(a)(3) of the Social Security Act.
Second, the Special Needs Trust must contain a provision which states that, upon the death of the disabled individual or termination of the trust for any other reason, the Mississippi Division of Medicaid will receive all amounts remaining in the trust, up to an amount equal to the total amount of Medicaid assistance paid to the disabled individual.
Essentially, the trust must repay any benefits the disabled individual received from the Mississippi Division of Medicare while also receiving financial benefits from the trust.
For example, let’s say a Special Needs trust is created and contains $100,000. Over the next few years, in addition to money from the trust, the disabled beneficiary also receives $20,000 in Medicaid benefits before his or her death. At the disabled individual’s death, the trust must transfer $20,000 of any remaining funds to the Mississippi Division of Medicaid to reimburse it for the benefits received.
As you may have noticed above, these trusts are meant to be established for individuals under the age of 65. This is not to say that payment of benefits will end after the disabled individual reaches the age of 65, but any new contributions added to the trust after the beneficiary reaches this age will not be eligible for the all-important “excepted status” and may affect the disabled person’s eligibility for public assistance benefits, as well as incur other liabilities.
Consider Your Estate Planning Structure
Thankfully, Special Needs Trusts are not necessarily required to “stand alone” and separate from your other estate planning vehicles. This means that the funds in a singular “Pooled Trust” – say, for the benefit of all of your grandchildren, only one of whom may be special needs – may incorporate a Special Needs Trust among any separate arrangements. In this way, your assets may earn investment interest and other financial benefits as a whole while being managed by a singular Trustee, say a loved one or your trusted attorney.
A Special Needs Trust may be incorporated into such a “Pooled Trust” so long as the Pooled Trust is established and managed by a non-profit entity that has been granted tax exempt status by the Internal Revenue Service and each beneficiary of the Pooled Trust is associated with a separate account.
Essentially, a Special Needs Trust may be created on its own for the benefit of a single disabled individual, or established as a specific part of a larger trust for the benefit of many loved ones. So long as you follow the rules, this trust can be structured as best fits the needs and desires of you and your family.
Needless to say, the information here is meant only to be a primer on the subject of Special Needs Trust, and does not incorporate every angle and element that can affect how your estate. If you think that a Special Needs Trust may be right for your specific situation, we implore you to contact an experienced and qualified attorney. It’s worth it!
Based in Ridgeland, Mississippi, The Wade Law Firm, PLLC, represents clients with a full range of quality uncontested matters in the Jackson Metro Area and throughout Central Mississippi. We’re able to offer a predictable schedule of flat fees for many of your legal needs.