Author Topic: Special needs trusts and planning for an special needs adult child  (Read 5355 times)

jtray

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Hi! I am looking for resources on financial planning for a special needs adult.

The basic question is it better to split an inheritance equally between two children - knowing that one will most likely both need to and will use the money on the special needs sibling or simply put the whole amount into a special needs trust.

I am doing this research for a close family friend, so please include the basics!

SomedayStache

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Re: Special needs trusts and planning for an special needs adult child
« Reply #1 on: January 02, 2018, 05:21:06 PM »
No useful legal knowledge from me, but I am the other sibling in a similar situation.
My parents and I discussed options and I thought that it would be easier on me emotionally to have the entire amount put in the special needs trust.  That way I'm not forced to spend "my money"on my special needs sibling.  I thought this would minimize resentment.
Hope someone has some more tangible advice to offer. 

jtray

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Re: Special needs trusts and planning for an special needs adult child
« Reply #2 on: January 02, 2018, 11:23:09 PM »
How have you dealt with the emotional fallout of an unfair division of assets?

 I know the siblings love each other- but one is clearly going to get less either up front getting less or zero, or down the line when they would need to spend "their (inherited) money" on the sibling. The parents are trying to be fair- but I wonder if more people in your situation would pick to never have the money at all rather than to have it and then need to spend it (potentially feel obligated to spend it) on their sibling.


MayDay

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Re: Special needs trusts and planning for an special needs adult child
« Reply #3 on: January 03, 2018, 05:09:20 AM »
I definitely wouldn't have it hanging over the sibling that they have money but it's not really theirs.

Plus there is no guarantee that it is protected.


lizzzi

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Re: Special needs trusts and planning for an special needs adult child
« Reply #4 on: January 03, 2018, 06:26:55 AM »
I have two daughters, one well and one with a severe disability. My advance directives call for my estate to be divided in half when I die. Half goes outright to the well daughter, and the other half goes to a Special Needs Trust for the disabled daughter. My younger brother is the executor.

The well daughter is extremely bitter and vocal about this--feels that since the disabled daughter is on government benefits (SSI, Medicaid, Section 8 housing), she does not need to receive anything and that everything should go to her, the well daughter. The well daughter is divorced with three children, has a good federal job in law enforcement, and has received approximately $200,000 up front from me over the past ten years. The well daughter flatly refuses to be executor of my will or to have anything to do with helping the disabled daughter after her father and I die. There is no bad blood between them particularly, but the well daughter says she is not a health care worker--not a caregiver--does not want to be involved. They live at opposite ends of the country. My ex-husband has done his estate planning similarly, dividing his estate between well daughter, disabled daughter, and his new wife. Our well daughter refuses to assist her sister with his plans for her, either. (Disabled daughter will receive his military pension and Tricare--obviously going off Medicaid etc. at that time--no comment on whether or not this is a good idea--I have no control over what he does.)

So just my anecdotal two cents worth--be careful, as these situations are fraught with pitfalls--legal, financial, personal.

jtray

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Re: Special needs trusts and planning for an special needs adult child
« Reply #5 on: January 03, 2018, 01:06:43 PM »
Thank you so much for the insights. I definitely see family dynamics playing a huge role in what path to take. This is such an individual decision- does anyone have recommendations for what bases to make sure are covered?
The individual now is living independently in low income housing with daily visits from family. This is a recent development and is a change in how the planning for expenses needs to be done. In planning, we are assuming the low income housing will remain an option- but potentially the housing program could be dismantled or in the future the individual may no longer qualify if the line moves for qualifications. The insurance and medical costs also seem like they could balloon at any time. How does one plan for these? Over estimating is basically making the amount needed seem unobtainable.

desertadapted

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Re: Special needs trusts and planning for an special needs adult child
« Reply #6 on: January 03, 2018, 02:28:04 PM »
Estate planning for a special needs adult is definitely something that would benefit from lawyer involvement.  There are a ton of issues to consider.  State rules concerning special needs and spendthrift trusts vary.  My recollection is that Medicaid, SSDI and SSI have varying limits on assets.  Same thing with section 8 (and related) housing.  If the special needs family member receives money straight up, without a special needs or spendthrift trust, it can impact benefits eligibility.   If the special needs family member isn't eligible for government assistance, I have substantial questions about whether they would even be eligible for a special needs trust.  Again, I'd check with a lawyer - this is much more nuanced than can be covered on this forum. 

lizzzi

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Re: Special needs trusts and planning for an special needs adult child
« Reply #7 on: January 04, 2018, 08:38:10 AM »
Estate planning for a special needs adult is definitely something that would benefit from lawyer involvement.  There are a ton of issues to consider.  State rules concerning special needs and spendthrift trusts vary.  My recollection is that Medicaid, SSDI and SSI have varying limits on assets.  Same thing with section 8 (and related) housing.  If the special needs family member receives money straight up, without a special needs or spendthrift trust, it can impact benefits eligibility.   If the special needs family member isn't eligible for government assistance, I have substantial questions about whether they would even be eligible for a special needs trust.  Again, I'd check with a lawyer - this is much more nuanced than can be covered on this forum.

+1     Yes, it's a morass, and you must work with a good attorney who knows the law in your state. The goal is usually to help the disabled person without causing them to lose their government benefits.

jtray

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Re: Special needs trusts and planning for an special needs adult child
« Reply #8 on: January 04, 2018, 05:15:08 PM »
Hi again,

Maybe I should clarify. The trust is set up (by an attorney) but deciding when to fund it- and with how much is still up in the air. The pot of money could 1. Wait for the parents to pass- then fund the trust 2. Fund it slowly over the lifetime of the parents 3. Split the pot in half to equally fund the siblings.  Government benefits will be protected, but they are subject to change over time.

Has anyone done this before? Thoughts?

maizefolk

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Re: Special needs trusts and planning for an special needs adult child
« Reply #9 on: January 04, 2018, 05:48:21 PM »
As far as I know, assuming the parents don't expect to pay estate taxes, there is no advantage to #2 relative to #1.

For #3, a lot of that is family dynamics rather than finances. How big does your friend expect their estate to be (in multiples of  the annual expenses the special needs trust will need to cover*)?

*So not including the cost of benefits provided by medicaid/SSI.

davisgang90

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Re: Special needs trusts and planning for an special needs adult child
« Reply #10 on: January 05, 2018, 03:08:18 AM »
We are in a similar situation.  I've got 3 sons, the middle one has autism and we are his guardians despite his majority.  He will either live with us or in a group home his entire life.  After my wife and I are gone, he will either be in a group setting or living with one of his brothers.

Our intent is to leave a portion of our estate to each, but the one brother who will take care of our middle son may get more.

As a retiring military member, I've got a benefit I can pass on to my middle son by purchasing the Survivor Benefit Plan.  I pay a monthly premium (pre-tax) while I'm alive and after I pass on, my middle son will receive 55% of my pension for the rest of his life (pension continues to recieve COLA adjustments).  Bottom line is that he will be in good shape financially (and if he is living with one of his brothers, that brother will benefit from the money as well).  This benefit will go into a separate special needs trust and won't impact my son's ability to receive SSI etc.

We've already completed the guardianship paperwork and one of the two special needs trusts, just have to finish up the last one after our wills are redone.

lizzzi

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Re: Special needs trusts and planning for an special needs adult child
« Reply #11 on: January 05, 2018, 09:21:55 AM »
My understanding is that once the money goes into the special needs trust, the family will no longer be able to retrieve it...let's say...maybe the disabled person dies young. My understanding is that the trust funds will be taken by the government to provide some reimbursement to Medicaid. So if that's the case, I think it's best not to fund the special needs trust any earlier than you have to.

maizefolk

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Re: Special needs trusts and planning for an special needs adult child
« Reply #12 on: January 05, 2018, 09:47:04 AM »
Lizzzi are you thinking of ABLE accounts? http://www.ablenrc.org/about/what-are-able-accounts

If so, yes the government seizes all the money in the account after the death of the beneficiary. There's also a cap on how much money can be in the accounts before they start reducing government services to the beneficiary, and the money in the account has to be invested in funds managed by a company selected by the state, which often have high expense ratios.

A special needs trust is a trust that's set up privately which will only pay for services for a special needs beneficiary which are not provided by the government, allowing the money to go into the trust without throwing the beneficiary off of SSI/medicaid.* These trusts can also dissolve and send their assets to (for example) other surviving children or grandchildren on the death of the primary beneficiary. It's not a different kind of legal structure from a normal trust, it's just how the trust is written that makes it a special needs trust.

*This is why competent legal council with lots of experience in the specific area of special needs trusts is essential in setting them up. If you get it wrong, your kid could end up thrown off SSI/medicaid after you die until all the assets in the trust are depleted and then end up on a long waiting list to get services again once all the money is gone.

« Last Edit: January 05, 2018, 09:49:16 AM by maizeman »

lizzzi

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Re: Special needs trusts and planning for an special needs adult child
« Reply #13 on: January 05, 2018, 11:10:55 AM »
Lizzzi are you thinking of ABLE accounts? http://www.ablenrc.org/about/what-are-able-accounts

If so, yes the government seizes all the money in the account after the death of the beneficiary. There's also a cap on how much money can be in the accounts before they start reducing government services to the beneficiary, and the money in the account has to be invested in funds managed by a company selected by the state, which often have high expense ratios.

A special needs trust is a trust that's set up privately which will only pay for services for a special needs beneficiary which are not provided by the government, allowing the money to go into the trust without throwing the beneficiary off of SSI/medicaid.* These trusts can also dissolve and send their assets to (for example) other surviving children or grandchildren on the death of the primary beneficiary. It's not a different kind of legal structure from a normal trust, it's just how the trust is written that makes it a special needs trust.

*This is why competent legal council with lots of experience in the specific area of special needs trusts is essential in setting them up. If you get it wrong, your kid could end up thrown off SSI/medicaid after you die until all the assets in the trust are depleted and then end up on a long waiting list to get services again once all the money is gone.

No, I was talking about a special needs trust. We were told that when the disabled person dies, the money left in the trust goes to the government. So if I put in a million dollars (or whatever--I don't have a million dollars) now, and my daughter died, I could not get anything back. I totally agree with the pitfalls of leaving your disabled family member with enough outright so they lose their government benefits. The whole family is worried that that is what my first husband is doing--leaving her with Tricare and his military pension--losing her her Medicaid and the whole support system she's had since she was a teen-ager. Very well-meant, but is it wise? Will she be able to function well enough to handle it? Will she be able to access anyone who can help her? She is very low functioning and tends to do what is the worst for herself, not what is the best for herself. I can't control everything, especially if I'm deceased by that time. So a big worry.

maizefolk

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Re: Special needs trusts and planning for an special needs adult child
« Reply #14 on: January 05, 2018, 11:28:35 AM »
Huh. Okay, that is not the legal advice my family received in a similar situation, but maybe other aspects of our situations are different.

With regard to the pension/tricare, at least in the state my sibling lives in, a lot of medicaid support services are contracted out through nonprofits. The nonprofits also provide services to folks with similar needs to are not medicaid eligible (for example people disabled/brain injured in car crashes who received large financial settlements from insurance companies). If the situation is similar where you are, depending on how large your ex-husband's pension is, perhaps your daughter would be able to pay privately for a lot of the same support network -- from the same people -- she currently receives?

Regardless, it sounds like a very hard situation, I realize there are no easy answers, and you really have my deepest sympathies.* I've seen what worrying about what will happen to my own sibling after they are gone has done to my parents. 

*I know that comes out sounding way too formal. I suck at talking about emotional issues.

lizzzi

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Re: Special needs trusts and planning for an special needs adult child
« Reply #15 on: January 05, 2018, 04:02:42 PM »
Maizeman, in my 20 years as a public health nurse, one of the saddest and most troubling situations was helping families figure out how an adult disabled child would manage after the parents died. Elderly parents agonized over this. I do have a couple thoughts--first of all, it is crucial to help the disabled young adult be as independent as possible within their limitations. Secondly, (sort of a Part B to my first point) is that they need to be hooked into whatever support systems are out there for their particular disability--learn to make use of whatever is available, and that includes whatever social life is available, too. Too often the parents--gradually aging out and facing their own health problems--simply will not relinquish any control, and keep the disabled young adult in their own private little cocoon of care. It can work for a while--for years--but eventually the elderly parents are not going to be able to do it--and what then? Some families have agreements to hand off care to the siblings, and in some situations--not all--that can work well. I think one of the most painful things to watch as a nurse out in the community is when the surviving parent drops dead of a heart attack or something, and the disabled adult child is just left high and dry. Not only are they grieving, but suddenly they face a period of no supports whatsoever, while doctors/case managers/adult protective services etc.  scramble around trying to help the person transition to a care plan that will provide them with a decent quality of life and some socialization and enjoyment. Sometimes relatives do step up to the plate, but often they don't. My point is that early, common-sense planning and letting the young adult have at least something of their own life from day one will prevent a lot of worry and hassles at the other end of the road. And of course (not to hijack the thread), good estate planning helps facilitate this.

MayDay

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Re: Special needs trusts and planning for an special needs adult child
« Reply #16 on: January 06, 2018, 06:54:14 AM »
So true lizzzi.

My great uncle is "mentally retarded", that was the term in the 60's, and I don't know what his actual diagnosis today would be. His mom (my great grandma) couldn't care for a large young man, and luckily had the forsight to place him in a group home while she was still fairly capable.

While she was alive (for about 20 years after he went into the group home) she regularly had him come home for the weekend, and took him on trips, etc, but he was also settled in the home with services set up.

When she died she willed her house to the group home, and they had an agreement that the house would be used as a group home at least as long as my uncle is alive, and the group home can sell it after that if they want.

So he still lives in his childhood bedroom, had consistantcy, etc. My uncle is his legal guardian but basically just visits occasionally and checks in with the group home staff,they handle everything.

KungfuRabbit

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Re: Special needs trusts and planning for an special needs adult child
« Reply #17 on: January 07, 2018, 04:24:41 AM »
"Not fair" is being born special needs.

healrhy people complaining about inheriting less money need to get their head out of their ass.

lizzzi

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Re: Special needs trusts and planning for an special needs adult child
« Reply #18 on: January 07, 2018, 08:25:04 AM »
There are attorneys who specialize in this type of thing. Probably the best place to get some names would be from the local organizations for each specific kind of disability...maybe the county or state organizations for...let's say...the developmentally disabled if your LO has Downs Syndrome...or the Office for Mental Health if your LO has a major psych. diagnosis. If your LO is on Medicaid, their case manager or case manager supervisor may have some phone numbers of attorneys you could try.

maizefolk

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Re: Special needs trusts and planning for an special needs adult child
« Reply #19 on: January 07, 2018, 08:38:42 AM »
Lizzzi are you thinking of ABLE accounts? http://www.ablenrc.org/about/what-are-able-accounts

If so, yes the government seizes all the money in the account after the death of the beneficiary. There's also a cap on how much money can be in the accounts before they start reducing government services to the beneficiary, and the money in the account has to be invested in funds managed by a company selected by the state, which often have high expense ratios.

A special needs trust is a trust that's set up privately which will only pay for services for a special needs beneficiary which are not provided by the government, allowing the money to go into the trust without throwing the beneficiary off of SSI/medicaid.* These trusts can also dissolve and send their assets to (for example) other surviving children or grandchildren on the death of the primary beneficiary. It's not a different kind of legal structure from a normal trust, it's just how the trust is written that makes it a special needs trust.

*This is why competent legal council with lots of experience in the specific area of special needs trusts is essential in setting them up. If you get it wrong, your kid could end up thrown off SSI/medicaid after you die until all the assets in the trust are depleted and then end up on a long waiting list to get services again once all the money is gone.

No, I was talking about a special needs trust. We were told that when the disabled person dies, the money left in the trust goes to the government. So if I put in a million dollars (or whatever--I don't have a million dollars) now, and my daughter died, I could not get anything back.

So I've been doing some more reading about this since you brought it up and I have a new theory. Perhaps you are describing what is called a "first party" special needs trust, and I'm talking about a "third party" special needs trust. I didn't know the first party kind existed, so even if this isn't the explanation, it was useful to learn about, and I wouldn't if we hadn't starting this conversation, so thank you.

First party special needs trusts are established as a separate type of legal entity through federal and, often, state law. They are a  way for a disabled person who already has too many assets to quality for SSI/Medicaid to put the assets into this specific kind of trust, so they can receive services. States have rules about what the money in the trust can be spent on. When the beneficiary dies, the state can claim take any assets remaining in the trust as partial reimbursement for the cost of providing services to the disabled person.

Third party special needs trusts are regular trusts set up to help take care of a specific disabled person. The trust documents are written in such a way that the assets in the trust are to be used to benefit a disabled person in ways which would not disqualify that person from SSI/Medicaid, but the disabled person never actually owns the assets. After the death of the beneficiary, the assets in the trust can go to someone else rather than to the state.

1st party makes sense if you accumulate significant assets and then become disabled (for example a brain injury in a car crash), if you receive a bunch of assets as a settlement for becoming disabled (insurance pay out from a car crash), or if you directly inherit a significant chunk of money from someone who didn't know or wasn't able to set up a 3rd party trust.

3rd party makes sense if you're intending to leave a significant sum of money to help take care of a person with special needs. A lot more flexibility in how the trust us set up, how the assets are spent, and potentially the assets can pass to other children or grandchildren if the child with special needs predeceases them.

https://www.nolo.com/legal-encyclopedia/special-needs-trusts-first-party-vs-third-party-trusts.html

Apple_Tango

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Re: Special needs trusts and planning for an special needs adult child
« Reply #20 on: January 07, 2018, 09:14:05 AM »
My advice is to not put off the planning. My cousin (age 40) had a husband and 2 kids. One neurotypical age 18, and one severely autistic age 16. The adults owned their house outright, a Porsche, a corvette, and several apartment buildings in DC. Millionaires many times over. About a year ago, her husband passed away from a heart attack. 2 weeks later my cousin died from pneumonia. She discharged herself AMA from the hospital because no one was able to be at the house taking care of the 16 year old. It. Was. Devastating. Luckily they had some sort of estate plan and the 18 year old can’t get all the money yet (he just crashed the corvette last week...) and I believe some (I’m assuming half)  automatically goes for the care of the 16 year old. Not sure of the distribution, but the 18 year old isn’t emotionally mature enough to take care of his sister. Right now she’s in a group home, and she’s had to go to several different ones because the first few weren’t a good fit. She is traumatized from the upheaval and has begun hitting, eating her own feces, taking off her clothes, stuff like that. My aunt is involved with the care and making sure her granddaughter has the best options, but if my aunt wasn’t in the picture I don’t know what would have happened. Make sure someone you trust is looking out for the children with special needs, financially and *emotionally*
« Last Edit: January 07, 2018, 11:16:19 AM by Apple_Tango »

better late

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Re: Special needs trusts and planning for an special needs adult child
« Reply #21 on: January 07, 2018, 10:28:07 AM »
I am considering the best way to help a disabled sibling, and one option is setting up a third party trust. I identified several attorneys in my state who specialize in this type of work and am attending a seminar led by one of them in 2 months.