Personal injury may dictate Special Needs Trust
During the last week of March, I attended the second annual conference of the Academy of Special Needs Planners in New Orleans with 120 other attorneys. One of the topics discussed was the role of Special Needs Trusts, or supplemental needs trusts, for those who have suffered a personal injury. Elder Law encompasses the needs of disabled persons regardless of their age.
I have written in the past about the wisdom of incorporating special needs language in every trust that distributes funds after the trustmaker’s death, in order to insure that the inherited funds will not cause the loss of public benefits. These trusts are called third-party trusts because they are established by another party, other than the recipient of the public benefits, and funded with funds that are not the assets of the person who is receiving public benefits. Individuals who are doing estate planning who have a child or grandchild receiving Supplemental Security Income, or SSI, of perhaps $637 a month, usually notify the attorney of the issue.
Often, they mistakenly believe they must disinherit that person, or give their share to another sibling who promises to care for the disabled person. But, if that sibling dies and the funds go to that person’s surviving spouse, who then enters a second marriage, the disabled child may never see any benefit of that decision. Individuals establishing the revocable trust for estate planning need to realize that they can leave the disabled child distributions of income and principal from that child’s share, if the proper limiting language is included in the trust.
When that disabled child dies, their share may pass automatically to their children or their siblings, as set forth in the trust. The use of this limiting language in any third-party trust is important because, subsequent to the execution of the trust, and perhaps after the death of the trustmaker, the well child, or a grandchild, could become disabled and need to qualify for public benefits, such as SSI and Medicaid.
If a person wants to qualify for public benefits, that applicant cannot have more than $2,000 plus certain exempt property, such as a home and vehicle. Sarah, for example, applied for and received both SSI and Medicaid after a catastrophic auto accident left her a paraplegic. The driver who was at fault was driving a company-owned van. A year after her partial recovery, she hired a personal injury attorney to sue the company who owned the van and their driver. As much as some of her friends joke about personal injury attorneys, she was glad she decided to pursue her legal remedies.