The Purpose of Special Needs Trusts: Why Would I Want to Establish a Special Needs Trust?

According to the U.S. Census Bureau, nearly one in five people have special needs, which means that a large number of families have a member in this category: child, adolescent, young or middle-aged adult, or elderly person. For special needs individuals who are unable to work or support themselves, the government provides disability income in the form of Social Security Disability Income (SSDI) or Supplemental Security Income (SSI). The primary difference between the two is that SSDI is available to workers who become disabled after accumulating enough work credits to qualify for the assistance. SSI, on the other hand, is available to low-income individuals who have never worked or children who were disabled at an early age.

Unfortunately, as with other government benefits, the amount disabled individuals receive on either program is barely enough to cover basic necessities. It is for this reason that families with special needs members who are well-advised by competent wills and trusts attorneys typically set up special needs trusts for their disabled loved ones.

The Advantage of a Special Needs Trust Over an Inheritance

For parents looking to support their special needs children through adulthood, as well as children wanting to keep life stable for their elderly parents or other relatives, special needs trusts are often the perfect solution. Unlike a lump sum inheritance which would likely put your loved one’s assets over the threshold for receiving benefits, the trust will allow you to dole out money to the designated beneficiary as needed. This method of distribution for extra expenses and occasional luxuries allows the special needs individual to lead a more comfortable life without putting his/her government benefits in jeopardy.

Typically when you, the grantor, have your special needs trust attorney create a such a trust, you name yourself trustee — the person in charge of dispensing extra funds as needed. Your attorney will also assist you in assigning the role of succession trustee so that if you predecease your special needs relative an individual you trust will take over your role. In cases in which, as frequently occurs, the trustee lives in one state and the beneficiary in another, it is crucial to have a special needs trust attorney who can bridge the distance with knowledge and skill. This is a common situation for Long Islanders or New Yorkers who often retire to Florida. In such cases it is a great advantage to have a special needs trust attorney who routinely works with clients who live in either state and often travel between the two.

What the Special Needs Trust Can and Can’t Cover

Special needs trusts are designed to make your loved one’s life more comfortable and pleasurable, but by law are not permitted to pay for necessities. The government’s reasoning on this matter is that if you (the trustee) is paying for rent or groceries, you are supporting your relative by providing income, thus making the recipient ineligible for government assistance.

It is of great importance that you, and whoever you appoint as your succession trustee, understand what you can and can’t pay for out of the funds in the trust. As trustee, for example, you are not permitted to pay the beneficiary’s electric bill, but you are allowed to buy him or her a computer. Similarly, while you cannot buy the beneficiary’s weekly groceries, you can provide a special quilt, basket of fruit or restaurant meal.

Being a Special Needs Trustee Is a Big Responsibility as well as a Blessing

As your special needs trust attorney will explain, a special needs trust is a wonderful way to smooth the pathway for a burdened loved one. The special needs trust will permit you to be as generous as you can afford to be without endangering the government benefits that provide your family member with fundamental support. Still, it is essential to remember that you also have serious duties when you take on the role of trustee. You will be tasked with keeping up with your beneficiary’s needs, paying appropriate taxes, keeping records, and investing in or liquidating trust property as needed.