[{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.easyquotes4you.com\/a-guide-to-a-special-needs-trust\/#BlogPosting","mainEntityOfPage":"https:\/\/www.easyquotes4you.com\/a-guide-to-a-special-needs-trust\/","headline":"A Guide to a Special Needs Trust","name":"A Guide to a Special Needs Trust","description":"Quick Navigation Links Show 1 What is a Special Needs Trust (SNT)? 2 Who Needs a SNT? 3 How to Prepare for a SNT 4 Choosing the Right Trust 5 Choosing the Right Trustee 6 Find the Right Lawyer 7 Ways to Fund a Special Needs Trust 8 What Type of Life Insurance Policy is.. More<\/a>","datePublished":"2018-12-31","dateModified":"2020-02-13","author":{"@type":"Person","@id":"https:\/\/www.easyquotes4you.com\/author\/site-admin\/#Person","name":"Rob Pinner","url":"https:\/\/www.easyquotes4you.com\/author\/site-admin\/","identifier":1,"image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/e4da538e10e071b419f4843e8193941a0ff5ad58e937daa177fa846a5124dc4d?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/e4da538e10e071b419f4843e8193941a0ff5ad58e937daa177fa846a5124dc4d?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"Rob Pinner","logo":{"@type":"ImageObject","@id":"https:\/\/www.easyquotes4you.com\/wp-content\/uploads\/2018\/09\/logo-shape-e1536791917640.png","url":"https:\/\/www.easyquotes4you.com\/wp-content\/uploads\/2018\/09\/logo-shape-e1536791917640.png","width":600,"height":60}},"image":{"@type":"ImageObject","@id":"https:\/\/www.easyquotes4you.com\/wp-content\/uploads\/2018\/12\/life-insurance-special-needs-child.jpg","url":"https:\/\/www.easyquotes4you.com\/wp-content\/uploads\/2018\/12\/life-insurance-special-needs-child.jpg","height":415,"width":640},"url":"https:\/\/www.easyquotes4you.com\/a-guide-to-a-special-needs-trust\/","commentCount":"2","about":["Special Needs Life Insurance"],"wordCount":2230,"articleBody":" Quick Navigation Links Show 1 What is a Special Needs Trust (SNT)? 2 Who Needs a SNT? 3 How to Prepare for a SNT 4 Choosing the Right Trust 5 Choosing the Right Trustee 6 Find the Right Lawyer 7 Ways to Fund a Special Needs Trust 8 What Type of Life Insurance Policy is Best for Special Needs Trust? 9 Restrictions Associated with a Special Needs Trust 10 Distributions Allowed for a Special Needs Trust 11 Advantages and Disadvantages of a Special Needs Trust 12 Advantages are: 13 Disadvantages are: 14 Final Thoughts 15 Frequently Asked Questions 16 What is a special needs trust? 17 What are some allowable distributions from a special needs trust? 18 What are the advantages of a special needs trust? 19 What are the disadvantages of a special needs trust? If you are a parent to a special needs child, then I am sure this question has crossed your mind \u201cHow will I provide for my child after I am gone?\u201d This was my first thought when my son, Liam, was diagnosed with down syndrome, 11 weeks in the womb.I knew he would be taken care of as long as my wife and I were living, but what about when we\u2019re gone? This is our first child, I am 42 and my wife is 38 years old. With the average adult who has down syndrome living well past their 50\u2019s, I would be 92 when he turned 50. There\u2019s a good chance I won\u2019t be here to see 92!! So, the question kept popping into my mind:How would Liam be taken care of when my wife and I have passed on? After many hours doing my own research and consulting with a couple of lawyer buddies, it became evident that we needed a Special Needs Trust (SNT).I will be honest, even though Tracy and I are in the financial industry, this task seemed a little intimidating. The average American has had no prior experience with a trust, much less a Special Needs Trust.My first questions were: How much is this going to cost to set up? How are we going to fund the trust?We are not wealthy by any means. After successfully getting our trust completed last week, I decided it was time to do an article on what a Special Needs Trust (SNT) is, what it can be used for, and how to fund. I hope this helps take some of the concern out of how to prepare for our children when we are no longer around to care for them ourselves.What is a Special Needs Trust (SNT)?A Special Needs Trust (SNT) is set in place and intended to supplement, but not replace, a disabled person\u2019s government benefits by paying for non-covered services or equipment. Even though this trust can be complex for several reasons, the advantages far outweighs its complexities.A third-party SNT is the most often used by parents of children with special needs. These trusts can hold any asset belonging to the family such as, life insurance, IRA, or real estate. Unlike the other trusts, the third-party SNT does not contain the \u201cpayback\u201d clause. This means when the beneficiary with special needs dies, the remaining balance of the trust can pass to other family members and does not have to pay anything back to the government.Who Needs a SNT?It was a great surprise to learn that Social Security Income for a Special Needs Adult maxes out at $750\/month. Of course, they are other programs that offset some of the cost of living but not nearly enough to live a happy and healthy life. We all know that government programs, while they help, do not come close to covering the cost to care for our special needs\u2019 children.A SNT can allow your child to still qualify for government benefits, while providing supplemental benefits from the trust for his\/her care.If your child is on Medicaid or any other governmental program and will inherit a substantial amount of money, a SNT will be needed to protect them from losing any benefits.Since the passing of the Affordable Care Act (ACA), and its prohibition of denying benefits to consumers with pre-existing conditions, Medicaid may not be the coverage of choice for our special needs\u2019 children. Since they qualify for regular health insurance policies a SNT wouldn\u2019t be needed to protect any Medicaid benefits.How to Prepare for a SNTMake sure to choose the right trustChoose the right Trustee (the person who oversees distributing the assets)Finding the right lawyerThe three main concerns after your trust is set up are:The management of assetsAccountingCosts of AdministrationWorking with a lawyer can help alleviate these issues professionally. Your family should know exactly what your wishes are and how involved they will be.Choosing the Right TrustWhen it comes to a SNT there are two main types, First-Party trusts and Third-Party trust.First-Party trusts are funded directly by the beneficiary who is disabled and are subject to Medicaid\u2019s\u2019 payback rules.A Third-Party trust are funded by parents, grandparents, etc. which is not subject to Medicaid\u2019s payback rules.Knowing which type of SNT to choose will ensure your child receives the maximum benefit while still abiding by the laws.Choosing the Right TrusteeFirst and foremost, you want to choose someone that will care for your child just as you would. Your trustee\u2019s job is going to be primarily distributing funds as instructed in the trust, when they are used for services or needs.Your trustee will have all the power, so you want to make sure they know and will follow not only your wishes but the needs of your child as well. This can be a family member or close friend of your choice.When we did our SNT, we named two trustees that must agree on all distributions. This helps to ensure that our wishes and our child\u2019s needs always came first. This also spreads out the work associated with a SNT which should lead to less administrative fees.Be very specific in what you want your wishes to be when you are gone and make sure your Trustee is someone with willpower to stick with the game plan and will not deviate whenever faced with resistance of any sort.Find the Right LawyerTechnically, you do not need a lawyer to draw up a SNT, but we highly recommend using one. A SNT can be complex and if it\u2019s not set up properly, could be void upon your death. It\u2019s essential to get expert advice especially since you are dealing with your child\u2019s future.Ways to Fund a Special Needs TrustThere are many ways to fund a SNT. You can use your family savings, real estate holdings, certificates of deposit (CDs), IRA, 401K, and life insurance to name a few. Anything with any value can be used to fund a SNT.The easiest method to funding a SNT if you don\u2019t have a large sum of money saved is life insurance. Most of us are not sitting here with a huge amount of savings. And let\u2019s be honest, we would like to retire one day and not have to \u201cpinch pennies\u201d in order to make sure our SNT is funded.Using life insurance to fund a SNT takes away the anxiety of having to fund the SNT now. Upon your death, the life insurance funds the trust along with any savings\/retirement you have left. This also will alleviate any fees associated with the trust until you die.What Type of Life Insurance Policy is Best for Special Needs Trust?If you use a life insurance policy solely for the purpose to fund your SNT, then you will want some type of permanent life insurance product (Universal Life, Whole Life).Buying a term life policy would be cheaper, but also could expire if you live beyond the term period. This would be disastrous if it were to happen, since the very existence of the policy is to fund the SNT.Always consult with someone who has experience dealing with estate planning and using life insurance to fund a SNT before making any decisions.Restrictions Associated with a Special Needs TrustA SNT does have restrictions on what the trust can and cannot be used for. Here are a few:No cash disbursement of any kindNo taxes can be paid unless asset is owned by the trustGroceries or food cannot be purchased by the SNTRentUtilities such as gas, water, electricConnection charges for utilitiesThe SNT cannot be used for any basic needs or you risk losing benefits.Distributions Allowed for a Special Needs TrustAny assets obtained (home, car, etc.) should be in the name of the trust and not the beneficiary (your child). Here are some acceptable distributions:The SNT can purchase and own a homeCar, Car Insurance, and Maintaining the vehicleTravel ExpensesEntertainment ExpensesLawyer and Accounting BillsClothesAny type of medical equipment, therapy, or medicationSchool tuition and booksFuneral ExpensesHousehold FurnishingsA trustee\u2019s biggest responsibility will be determining what the SNT can and cannot pay for. If there are any doubts, consult with the attorney who helped set up the trust.Advantages and Disadvantages of a Special Needs TrustAdvantages are:Keeps your child or loved one eligible for government benefits while being able to pay for services and care over and above what is provided by the governmentAny money put into the SNT is tax-deductibleGuarantees that money will be used to care for your special needs\u2019 child. This provides comfort knowing your child cannot be influenced when it comes to matters pertaining to money.Creditors are not allowed access to a SNT. It can only be used to care for the person disabled.Disadvantages are:The biggest disadvantage is the cost to set up a SNT. With that said, it cost us $2,000 to set up Liam\u2019s SNT. That\u2019s a small price to pay to ensure Liam will be cared for long after we are gone.Lack of independence is another disadvantage. The beneficiary (your child) is at the discretion of the trustee when requesting a disbursement. This gives very little to no control over how the money is dispersed. Therefore, it\u2019s important that your trustee fully understands your wishes.Medicaid payback is also a major drawback to some SNT. Always make sure to choose the right SNT in order to maximize your child\u2019s benefits. This also will ensure any remaining funds left in the trust after the beneficiary death are distributed to remaining heirs.Final ThoughtsIt can difficult to think about planning for your child\u2019s wellbeing after you are gone. A Special Needs Trust, if set up properly, can take away the anxiety you feel anytime you think about your child\u2019s life without you. A SNT gives you the peace of mind knowing you have done all you can to ensure your child has the best care possible after you pass.A SNT can be a detailed outline of how you want your child cared for when you are no longer able to. I believe in order to ensure your child has the best life after you are gone, a SNT is a must.Don\u2019t put this off another day. It\u2019s important and it\u2019s the best thing you will ever do to protect and provide for your child.Frequently Asked Questions\t\t\t\t\t\t\t\t\tWhat is a special needs trust?\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tA Special Needs Trust (SNT) is set in place and intended to supplement, but not replace, a disabled person\u2019s government benefits by paying for non-covered services or equipment. Even though this trust can be complex for several reasons, the advantages far outweighs its complexities. \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tWhat are some allowable distributions from a special needs trust?\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tAny assets obtained (home, car, etc.) should be in the name of the trust and not the beneficiary (your child). Here are some acceptable distributions: -The SNT can purchase and own a home-Car, Car Insurance, and Maintaining the vehicle-Travel Expenses-Entertainment Expenses-Lawyer and Accounting Bills-Clothes-Any type of medical equipment, therapy, or medication-School tuition and books-Funeral Expenses-Household Furnishings \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tWhat are the advantages of a special needs trust?\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tAdvantages of a special needs trust are:-Keeps your child or loved one eligible for government benefits while being able to pay for services and care over and above what is provided by the government-Any money put into the SNT is tax-deductible-Guarantees that money will be used to care for your special needs\u2019 child. This provides comfort knowing your child cannot be influenced when it comes to matters pertaining to money.-Creditors are not allowed access to a SNT. It can only be used to care for the person disabled. \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tWhat are the disadvantages of a special needs trust?\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t-The biggest disadvantage is the cost to set up a SNT-Lack of independence is another disadvantage. The beneficiary (your child) is at the discretion of the trustee when requesting a disbursement. This gives very little to no control over how the money is dispersed. Therefore, it\u2019s important that your trustee fully understands your wishes..-Medicaid payback is also a major drawback to some SNT. Always make sure to choose the right SNT in order to maximize your child\u2019s benefits. 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