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  • A SPECIAL NEEDS TRUST MAY HELP YOUR RELATIVE OR FRIEND

    This week’s question:
    We have a Down Syndrome son. We have read a little about a special needs trust for him, but are unsure how this really works. Can you shed some light on this topic? My husband and I have three other children and want to provide equally for all of our children.
    /s/Tiffany T.
    Almaden Valley
    Dear Tiffany—
    You are very wise, Tiffany, to be looking into a special needs trust for your son with special needs. Effective planning is essential for the benefit of your entire family. Of course, “special needs” is a term that covers many, many, types of disabilities.
    Let’s use an assumed name for your son with Down Syndrome, “Jack”. You and your husband can provide for an equal share of your estate to pass on to Jack through a special needs trust, or “SNT” to use the common acronym.
    This form of a gift is often very effective for gifting assets to a person with a disability, including Down Syndrome. In your situation, this would be called a “third party” SNT.
    You and your husband would provide the money for the trust, not Jack. If the disabled person would provide the money it would be called a “first party” SNT, such as when proceeds of a serious accident would be used to set up the SNT, often at the direction of a court as part of a settlement.
    The special needs trust for Jack would allow the trustees for Jack to receive and hold the money without losing needs-based public benefits, such as SSI, since the money in the trust is not “countable” in qualifying for assistance.
    However, there are many more benefits of a SNT, other than very properly preserving needs-based public benefits, such as long-term planning for his care, instead of being institutionalized, and planning for his education and other care so that Jack reaches his full potential. Sometimes parents are the only ones available to provide for such care of the disabled person.
    One of the key steps in the process for a SNT is the actual preparation of the trust. This is a document that properly sets forth the funding of the trust, the management of the trust, and the disposition of the money after the person passes on, so that all trust assets are not consumed by state and federal agencies when the trust is terminated by the death of the disabled person.
    Another critical step in the SNT process is the formulation of a management team in the preparation and management of a SNT. This management team is crucial in the care of a disabled person such as Jack.
    I have read where just a few years ago in 1983 the life expectancy of a person with Down Syndrome was 25, but now the statistical life expectancy with this disability is 50. One can readily see that good management is essential for the long term.
    Other benefits of planning include the maximum preservation of needs-based public benefits so as to provide for lifetime financial support and medical care. It is also essential for a person like Jack that he always have an advocate to preserve his rights, a safe and clean living arrangement, and assistance with finding employment.
    Many parents in this situation will ask, “How much money should we transfer to the special needs trust?” There is no easy answer to this question, and it is essential that professional help be consulted to address this and many other issues.
    Such professional help may well include investment and insurance advisors. You as parents will want to check out the Internet for a wealth of information that is available for working with SNTs. You may also find that three companies in particular have created departments that are specifically designed to deal with financial planning for persons with disabilities: MassMutual Financial Group, Merrill Lynch & Co., and MetLife Inc.
    Another important question will be the identity of the trustee(s) of the SNT for Jack. Parents often name themselves as the initial Co-trustees of the trust with the survivor to serve alone. This is perfectly OK in most situations. Then will come the important question of alternate or back-up trustee or Co-trustees for when the parents have passed on.
    In short, there is a lot of work in creating and implementing a good special needs trust. You are to be commended in taking the first steps by looking into it and carefully thinking about it. Jack and your entire family will forever be grateful for this. Best wishes in your work.

    /s/Donald J. DeVries
    Almaden Valley

    You can reach Mr. DeVries with your questions by email at don@almadenvalleylawyers.com, with “Almaden Times” in the subject line, fax at (408)268-6502, telephone at (408)268-9500, or mail at DeVries Law Office at 6475 Camden Avenue, Suite 200, San Jose, CA 95120. Your name will not be used. No attorney-client relationship is created by these articles.

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