All families should take estate planning seriously, but doing so is especially important when a family member has special needs. The cost of care services over a lifetime can be astronomical, making eligibility for public support an important consideration. By setting up a Special Needs Trust (SNT), a family can designate resources and access public assistance. Read on for guidance about establishing an SNT.
Protecting Assets and Accessing Support
The services and programs individuals with special needs may require throughout their lifetimes add up–fast. One way to ensure funds are consistently available is to tap public assistance. However, doing so involves meeting income eligibility requirements. This is why setting up a Special Needs Trust, sometimes referred to as a Supplemental Needs Trust, can be invaluable:
This specialized trust allows assets that family members and friends contribute to it to pay for goods or services that are in the beneficiary’s best interest, while also maintaining the beneficiary’s eligibility for means-tested government assistance programs. In planning for an individual with special needs, money is not everything – there may be residences or programs that require the person with special needs to be eligible for benefits such as Medicaid or SSI and do not accept private payment. A SNT allows the beneficiary to have the best of both worlds.
Essentially, the assets transferred into an SNT are held for the named beneficiary who needs them, but are never given directly to that individual. Instead, they are administered by the trustee appointed to oversee the trust. In addition to funds parents set aside in an SNT, friends and relations can also gift funds or make bequests via the SNT. In order for an SNT to successfully address family goals and intentions, it’s best to complement the legal and financial arrangements with a detailed Memorandum of Intent (MOI):
The Memorandum of Intent is a supplementary document to the Special Needs Trust (SNT), providing detailed instructions, preferences, and insights into the beneficiary’s lifestyle, care, and aspirations. While the trust document outlines the legal framework and financial provisions, the MOI offers a more personal and comprehensive view, guiding Trustees and caregivers in making decisions that align with the beneficiary’s best interests … .The MOI delves into daily living aspects, such as medical care, education, housing, and recreational activities….
The MOI ensures continuity of care and enables trustees and caregivers to provide personalized support … .The MOI serves as a communication tool, fostering collaboration among family members, caregivers, and trustees involved in the beneficiary’s life. Through open dialogue and shared understanding of the beneficiary’s wishes and requirements, stakeholders can work together more effectively in implementing the trust provisions and addressing evolving needs. Regular updates to the MOI allow for adjustments based on changes.
The MOI associated with an SNT is also a great place to proactively provide guidelines for “selecting caregivers, managing healthcare decisions, or handling conflicts of interest,” as well as ensuring “the beneficiary’s voice is heard and respected….”
Trustee Appointment, Duties and Bonds
Appointing a relative, friend or professional trustee to administer any type of trust is a big deal, but extra diligence is important when it comes to Special Needs Trusts. The trustee must be extraordinarily thoughtful when making decisions for an individual with a disability or capacity decline, and must also be skilled in collaborating with the diversity of other professionals who are likely to be involved in supporting the special needs individual. When considering the designation of a trustee for an SNT, keep these points in mind:
- Trustees have a fiduciary duty to act in the best interests of the beneficiary. They must avoid any actions that would harm the financial or personal interests of the disabled individual….
- The trustee must ensure that the trust supports the needs of the beneficiary while also following the trust’s terms. This encompasses using trust funds to pay for expenses not covered by government benefits, so that the beneficiary remains eligible for these programs.
- To act in the best interests of the beneficiary, the trustee must remain informed of the person’s unique needs and circumstances.
- Trustees may opt to work with such professionals as financial advisors, attorneys, and care providers. These kinds of experts can help ensure that the individual with the disability is receiving appropriate support.
As fiduciaries, trustees are held by law to very high standards. Accordingly, the trust agreement for an SNT, or any type of trust, may require a trustee bond, A trustee bond is a specific type of fiduciary bond that protects the interests of the trust and its beneficiaries in accordance with applicable laws. As a leading, national provider of many types of fiduciary bonds, Colonial Surety makes it easy and efficient for trustees in every state to obtain a trustee bond. Just get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere.
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