Establish a Special Needs Trust for Your Disabled Loved One

If you have a loved one with special needs, estate planning can pose daunting questions — How do I make sure my loved one is taken care of after I’m gone? How do I leave financial assets to them without interfering with their eligibility for government-based assistance programs? How do I make sure they’re looked after by the right people? All of these dilemmas can be solved by a special needs trust. An estate planning lawyer, like the ones serving Arizona residents at Dyer Bregman Ferris Wong & Carter, PLLC, can ensure your family member with special needs will be cared for financially, medically, and with proper oversight, all through a custom special needs trust.

What Are the Basics of Estate Planning Your Clients Need to Know?

From Anya’s interview for the Masters series on ReelLawyers.com

Show Transcript

Special needs planning is a specific area of estate planning where you’re making provisions for beneficiaries who have additional considerations. It often involves disability planning, and it’s commonly used for adults or minors who have some form of special need or disability.

For example, a beneficiary might be receiving government benefits that an inheritance could jeopardize, potentially disqualifying them from those benefits. It could also involve beneficiaries who aren’t good with money—who are spendthrifts and need someone to help manage their funds because they’re not able to do so themselves. Special needs planning can also address situations involving addiction issues, whether it’s substance abuse, mental health challenges, gambling, or alcoholism. There are all kinds of special needs that can be addressed within an estate plan.

We frequently hear from people who feel they have no choice but to disinherit a child due to one or more of these special considerations. They’ve been told they can’t leave them an inheritance, or they don’t trust that the beneficiary can handle it. Their solution is often to say, “I’m going to disinherit them and hope their siblings take care of them,” or they leave them on their own—not knowing what else to do.

But disinheriting isn’t the only option. We can create a special needs plan that protects the beneficiary and your estate, ensuring your assets are managed appropriately. We can design a plan that benefits everyone involved. It’s not a one-size-fits-all solution. We take a holistic view of your estate—considering the character and value of your assets, as well as the specific circumstances that create the need for special needs planning. By looking at all of these factors, we can create a plan that works for you and your beneficiary, meeting your intentions without disadvantaging them.

One important consideration in special needs planning is appointing an independent trustee. This trustee can assist the beneficiary in managing their inheritance in a way that aligns with the goals of the plan and supports their ongoing needs.

How Does a Special Needs Trust Differ from a Regular Trust?

Because those with special needs often rely on financial and medical assistance from government programs — such as Supplemental Security Income (SSI) and Medicaid, (called the Arizona Health Care Cost Containment System (AHCCCS) and the Arizona Long Term Care System (ALTCS) — you want to make sure they can continue to receive these services after you’re gone. You might think leaving behind a financial gift in a will would help supplement the funding received from these programs, but these additional funds would potentially disqualify the special needs individual for government aid. SSI, AHCCCS and ALTCS are needs-based, meaning they are given to those proven to have a low income and few assets. An inheritance would be counted as additional financial resources thereby risking government aid eligibility.

Special needs trusts, sometimes called supplemental needs trusts, are designed only for disabled individuals so they can receive supplemental funding while still maintaining their eligibility for needs based government programs such as SSI, AHCCCS and ALTCS. Assets placed in the trust are used for the benefit of the special needs beneficiary. And because funds are held in the trust, and not held by the individual, the Trust does not adversely impact needed governmental services or benefits;

These trusts are also highly customizable to better reflect each person’s needs. Funds can be allocated for specific uses, such as continuing education, medical supplies and equipment, or assistants and service animals. One of Dyer Bregman Ferris Wong & Carter, PLLC’s supplemental needs trust lawyers can guide you through the process, drafting a trust that is specific to your family’s situation, down to the last detail and without any loose ends. We focus on serving Arizona families with members who are disabled, focusing our energy and passion on each case to achieve the best results for our clients.

Kinds of Supplemental Needs Trusts

While the details of each trust can vary greatly, there are two overarching kinds of special needs trusts — first-party and third-party.

First-Party Trusts

As the name suggests, these trusts are formed for special needs individuals to transfer their own assets, like inheritance or settlements, into trust so they can continue to receive government benefits. By placing the funds in trust, overseen by a trustee, the disabled beneficiary no longer owns them, and they therefore don’t impact SSI or Medicaid eligibility. Once the trust is finalized, it’s irrevocable, meaning it can’t be changed or touched.

However, the special needs individual cannot create the trust on their own; rather, a parent or guardian must set it up. The beneficiary must also be under 65 when the trust is created and upon the death of the beneficiary, any remaining funds in trust are paid back to the government programs like Medicaid, as a form of reimbursement for benefits. Put another way, the government of Arizona is the final beneficiary after the initial beneficiary passes on.

Third-Party Trusts

This kind of trust is ideal for those planning ahead and wishing to leave a legacy. While first-party trusts must be created by a family member or guardian and are funded by the disabled person’s assets, a third-party trust can be created by anyone as part of an estate plan. This trust is funded by assets owned by the grantor. Since the assets never belonged to the special needs individual, they are exempt from the requirements of a first-party trust — there are no restrictions on age, no reimbursement to the government is required after the beneficiary’s death, and there’s more freedom on how the funds are used by the trustee for the beneficiary.

Our Special Needs Planning Attorneys are By Your Side

Choosing the best kind of supplemental needs trust is made easier with an experienced and compassionate special needs planning lawyer. Our attorneys will guide you through your options, draft and file the proper paperwork, and incorporate your trust into your existing estate plan. We’ll also help you decide whether an individual trustee or an entity like a bank or trust company is best for managing your trust. Above all, we’ll give you peace about your passing, knowing your special needs loved one will be cared for with airtight legal protection.

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Get Peace of Mind Today - Set Up a Special Needs Trust

Dyer Bregman Ferris Wong & Carter, PLLC serve Phoenix, Arizona families and individuals who need an extra layer of estate planning security for their special needs loved ones. There’s no need to worry about leaving behind a disabled individual — with a custom special needs trust, they will be in good hands. Make an appointment today to learn more: Call (602) 254-6008

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