“Hello! We would like to create a Special Needs Trust for our granddaughter who has autism. Is this something you could help us create?”
We receive this question often, and we can absolutely help!
If you have a family member with special needs, you understand that their care could be supported, now or in the future, through state and federal disability assistance programs.
However, eligibility for these services is often determined by the individual’s income and assets. Leaving money directly to the individual could lead to them having to pay for assistance out of pocket. In most circumstances, you don’t set up a Special Needs Trust (“SNT”) right away. At least not in the way you would think.
SNTs are often taxed at a higher tax bracket, require a separate tax ID number, and generally need to be funded once established. Maryland may also need to approve certain trusts and require reporting and accountings. While you are living, you can direct that money go into an SNT, but the trust itself may not be established until after you pass.
“How do you avoid unnecessary red tape and still provide for your loved one?”
As long as you are alive, you can provide for your grandchild. You will also need money for your own retirement. You should consult a Wills and Trusts attorney, like us, who has substantial experience establishing SNTs to discuss your options.
“In that case, I don’t need any planning now and can instead direct my Executor to create that Special Needs Trust after I die?” Incorrect.
We have helped thousands of families create Revocable Living Trusts with provisions that allow a Special Needs Trust to be established after they are gone. Failing to establish these provisions now creates two problems. First, your estate may have to go through court probate process. Second, even if your Executor immediately puts money into a newly created SNT, there will be a period when the assets are “accessible” to your grandchild. That is enough for her to lose her government disability benefits.
“I have life insurance that I want my child’s SNT to receive, so I need this trust now.”
That’s not necessarily how it works. Your Trustee won’t receive the insurance proceeds until after you die, so there is nothing to put into the trust right now.
This article should not be construed as legal advice, as each case is unique and depends on your circumstances.
If you need help protecting your money and loved ones in the event of death or disability, call us at 301-696-0567 or self-schedule online at www.lenaclarklegal.com.
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