What You Need To Know About a Special Needs Trust

If you’re providing care for an adult or child with special needs, it’s frightening to imagine what would happen if you were to suddenly become unable to provide care. Luckily with proper estate planning, necessary provisions can be implemented in order to continue providing care for someone with special needs in your absence.

This article provides background on a specialized document known as a special needs trust (SNT). Continue reading to learn about this document and how it can provide care for your loved ones that have special needs.

Florida Special Needs Trusts

A Florida Special Needs Trust (SNT) is a type of trust set up to provide support to a family member with special needs without jeopardizing their government benefits. Many times a person with physical or mental disabilities relies on government programs like Medicaid. These programs prohibit a disabled person from earning over a certain amount of money and place limits on how much money may be in their bank account.

This presents problems when a disabled person inherits money or wins a lawsuit. So, families may work with an experienced attorney to establish a well drafted SNT that protects their beloved family member’s governmental benefits while legally providing much needed support.

Florida SNTs must follow 42 U.S.C. Sec. Sec. 1396p (d)(4)(a). This type of trust is designed for disabled people under 65 years old.

Three parties are involved in a SNT:

Settlor. The person funding the trust is known as the settlor. This trust may be funded with money, stocks, property, or any other funds. The settlor may place funds in the trust while still alive or for disbursement after the settlor’s death. Each trust document is different.

Beneficiary. The beneficiary is a mentally or physically impaired person that receives the funds from the trust. The beneficiary does not have direct access to the funds.

Trustee. The trustee is a trusted friend or relative that the settlor chooses to handle the funds. The trustee is responsible for distributing the assets to the beneficiary as needed or as spelled out in the trust document.

Special Needs Trust Form

A special needs trust is an irrevocable trust. The document is fairly long due to the complex nature of the legal aspects involved. This is why it’s critical to consult with an attorney specializing in trusts when establishing or modifying this document. Here’s a PDF example of a special needs trust form to give you an idea of what these documents look like.

Example of a Florida special needs trust form titled declaration of irrevocable special needs trust

Here’s an example of common legal language found within this document:

“…The Trustee hereby agrees to hold that property and any other property of the trust estate, in trust, on the terms set forth in this instrument. It is Settlor’s desire, by this instrument, to create an inter vivos irrevocable special needs trust, whereby the property placed in trust shall be managed for the benefit of the Beneficiary during the Beneficiary’s lifetime and distributed to the beneficiaries named herein upon the death of the Beneficiary.” (Family Network on Disabilities, n.d, DECLARATION OF IRREVOCABLE SPECIAL NEEDS TRUST)

Trust Fairness Act

For many years, first-party special needs trusts could only be set up by parents, grandparents, legal guardians, or a Court. Since December 13, 2016 the Special Needs Trust Fairness Act was signed into law. This new law allows mentally competent disabled individuals to establish their own first-party SNT.

Basically, a mentally competent physically handicapped person who inherits money or wins money in a lawsuit may establish a trust. Setting up a SNT allows an individual to stay on government assistance while protecting an inheritance or other monies.

Administering a Special Needs Trust

A trustee must be very careful to follow the rules regarding trust distributions. Failure to follow trust distribution requirements may negatively affect a disabled person’s governmental benefits. For example, the following may NOT be paid for using trust funds:

  • Utility bills
  • Mortgage payments
  • Trash services
  • Food
  • Taxes
  • Rent

However, here are some expenses that will not affect government benefits:

  • School tuition
  • Legal fees
  • Phone and internet services
  • Vehicle expenses

Simply put, food and shelter are covered by the government; trust funds may not be used to cover basic living expenses. So, check with your attorney if you have any questions regarding how to distribute funds in a SNT.

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