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Do You Have Special Needs Trust Tunnel Vision?


The use of a special needs trust (SNT) as a planning tool to preserve settlement proceeds and maintain government benefits eligibility should not be presumed appropriate for every client. For many years there have been articles and advertising focusing on the benefits of special needs trusts.  Special Needs Trusts are, in fact, a gift given to us by the federal government.  Creating the right asset protection plan takes considerable analysis and deliberate steps.  One size does not fit all and you want a plan that is tailored to your client.

Facts To Analyze:

1. Age of client: If your client is 65+ years or older the federal law prohibits the use of an individually written special needs trust.

2. Disability: If your client does not meet the SSA definition of ‘disabled’ we cannot create a special needs trust.

3.  Value of Net Proceeds: Creating and administering a special needs trust should be cost effective for a client. If a client will net $50K it is not financially prudent to prepare a SNT and we will explore other legal planning options.

4.  Competency: Is the client competent to agree to the creation of a special needs trust? If not, we must explore having a guardian appointed to create the trust.

5.  Martial status: Is the client married or single? There are many more planning options available when a client is married simply because the law provides added protections for married couples.

Alternative Planning Options:

There are many other planning options available all of which are legal. Here are just a few of the facts we consider when recommending other planning options to help clients maintain government benefits:

1.  Pooled Trust: If the client is older than 65 years of age or, the net proceeds don’t justify the cost associated with a special needs trust we will explore a pooled trust with the client. It is managed by a non-profit organization and usually has a lower administrative fee.

2.  Purchasing Exempt Resources: Under the SSA law and Medicaid law there are certain types of resources that do not count even though they have a monetary value.  If the facts are appropriate we may recommend the purchase of an exempt resource such as a home or, paying off a mortgage or other debts.

3.  Personal Service Contract:  Where a client is a caregiver for an aging parent, we may be able to create a contract whereby the child is compensated for the value of future services to be provided.

4.  Disabled adult child: If the client has a disabled adult child we may be able to transfer some or all of the net proceeds to a special needs trust for the child while simultaneously preserving the client’s government benefits.

When meeting with you and your client we will carefully explore these issues as well as the family dynamics to provide a tailor-made plan to fulfill the client’s needs.  Our analysis includes a detailed written opinion letter that explains the law and evaluates the planning options.  Don’t trust your client’s future with just anyone – put your trust and confidence in my Board Certification as an Elder Law Attorney.

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