April marks Autism Awareness Month. If you have a family member on the spectrum and are unsure how they will take care of themselves in the future, a Supplemental Needs Trust is a document that can help meet your objectives.
When creating an estate plan and last will, you often choose which assets each heir should receive. With a special needs heir, however, additional planning will help protect the inheritance and financial future of your autistic family member. Depending on where your autistic heir falls on the ASD spectrum, planning for finances may be outside their skill set. By creating a special needs trust, you help ensure the money your family member needs will be available for living expenses and medical or support needs for as long as it lasts.
What is a Supplemental Needs Trust?
A Supplemental Needs Trust (sometimes called a Special Needs Trust) is a legal arrangement set up for the family member’s benefit but is not owned by them. You then can set aside money, property, and life insurance benefits to help prepare for current and future expenses. It helps plan individualized care over your family member’s lifetime while protecting their eligibility for public benefits.
Types of Supplemental Needs Trusts
When researching Supplemental Needs Trust, many people don’t know there are multiple types of SNTs. It is a broad term that can comprise various types of trusts: D(4)a or Self-Settled Special Needs Trusts, D(4)c or Pooled Special Needs Trust, and Third-Party Special Needs Trust.
D(4)a or Self-Settled Special Needs Trusts are used in situations when the individual with special needs receives money in their name. That money must be removed from the estate (not owned by them) to continue to qualify for government benefit programs. By utilizing this type of Special Needs Trust, the individual can benefit from this money while still qualifying for government benefits. The drawback to this type of trust is that at the end of the individual’s life, any money remaining in the D(4) trust is subject to a Medicaid payback, resulting in all the money in the trust being seized by Medicaid. However, if your child receives a large sum of money, this is often the only option.
D(4)c or Pooled Special Needs Trust is typically run by a non-profit organization that will manage the trust and is the trustee. The “pooled” means that the organization pools the assets of all participants (beneficiaries/individuals with disabilities) into one “master trust” with separate “sub-trusts” or “sub-accounts” for each beneficiary. The advantage to this trust is that the pooling feature allows families with lower assets still to have a special needs trust option for their child and have a qualified entity, such as a non-profit, manage and provide for the needs of their loved one. A Pooled Trust does have similar rules regarding remaining money in an individual’s “sub-trust” or “sub-account” when they die, as the D(4)a trust. For most pooled trusts, when a beneficiary passes away, Medicaid is entitled to be reimbursed for expenses they paid on behalf of the beneficiary. The charitable organization usually holds any remaining money (each organization that runs pooled trusts will vary in its amount when a beneficiary passes away.)
Third-Party Supplemental Needs Trust cannot be funded with money from the individual with a disability. This type of trust can be created and supported by anyone other than the person with the disability, including parents, grandparents, siblings, aunts, uncles, etc. When money is placed in this trust, it is not considered the disabled individual’s asset, which means they can still qualify for government benefits such as Medicaid and Supplemental Security Income (SSI). Still, the trustee (the person who manages the trust) will use the money from this trust to benefit the individual child. Families often choose this type of trust because it has no Medicaid Reimbursement Provision at the end of their child’s life. Suppose money remains in a correctly designed and managed Third-Party Supplemental Needs Trust at the end of your child’s life. In that case, the funds will be directed to whomever you determined it would go, such as other children or grandchildren or a charity.
The primary objectives of a Supplemental Needs Trust are to protect the assets left to a special needs beneficiary from predators and creditors, provide additional income to facilitate a better quality of life, prevent the loss of government benefits, including Supplemental Social Security (SSI) and Medicaid, and help plan for the ultimate future avoiding a burden on siblings or other family members once the primary caregivers are no longer able to take care of the person with autism.
The trust document contains a special provision stating that assets of the trust are to be used to supplement, not replace, any benefits your child is receiving. It can be simple or complex, depending on the kind of assets in the trust. The trust also helps avoid family conflicts by detailing when and how support can be withdrawn. It can also protect the inheritance from creditors.
Setting up an SNT is also requires planning for the future. Consider several medical, dental, or surgical expenses not covered by government benefits. Enrichment programs for educational or recreational experiences, psychological or behavioral counseling and support, transportation for medical and recreational purposes, physical therapy not covered by insurance or benefits if they will need a caregiver in the future, and more are other expenses to consider.
After selecting a Trustee to manage the trust’s investments, complete a Letter of Intent (also called a Memorandum of Intent or Life Plan). The letter is a vehicle through which parents or guardians communicate their instructions regarding their disabled beneficiary’s future.
To get started, contact us for a free consultation.
Sources: Autism Speaks, Autism Parenting Magazine