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First Five Things to Do: Special Needs Trusts

An expert on Special Needs Trusts shows you how to start

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If you've been to meetings about future planning for your child with special needs, or spent much time with other parents, or read articles on estate planning, you've probably gotten the message that you have to put money in a Special Needs Trust so that your adult child does not lose services due to maximum income requirements. And maybe you're dragging your feet on that, reluctant to take on another complicated chore. To take some of the trepidation out of the task, I asked Joanne Marcus, executive director of Commonwealth Community Trust (CCT), to walk us through the choices we'll need to make in getting a trust set up. CCT is a nonprofit organization established in 1990 by concerned citizens and parents of children with disabilities to provide an effective and affordable administration of either a Special Needs Trust or Pooled Disability Trust and act as the trustee in managing the disbursements. Marcus recommends these first five steps:

1. Understand the Need for a Trust "A Special Needs Trust allows the parent or caregiver to set aside money for the future care of their loved one living with a disability while protecting the U.S. government benefits (Supplemental Security Income and Medicaid) that are crucial in providing the medical and income necessary to supporting the individual," explains Marcus. "In order to qualify for these benefits, the individual can have no more than $2,000 in cash assets. A monetary gift, settlement, or inheritance will cancel these benefits, leaving the individual with both the need to manage the money themselves and, most likely, not have enough money to support their lifetime needs." To get started: Consider what those lifetime needs may be by filling out the MetDESK Special Needs Calculator.

2. Pick the Type of Trust That's Right for Your Child: Your choice of trust will be determined by who's putting the money into it -- you or your child. Special Needs Trusts, Marcus notes, are "funded by a third party, usually a close family member like a parent or grandparent, and can be coordinated with the family’s estate plan. The trust holds money or property that the grantor leaves for the beneficiary’s benefit." Pooled Disability Trusts, on the other hand, are "self-funded by the person with a disability, generally through a personal injury award or inheritance. and can be used for the same types of expenditures. The pooled trust program must be set up and managed by a nonprofit corporation and must be established with the same month the funds were received to protect benefits. Unlike the Special Needs Trust, where the state does not need to be reimbursed if the beneficiary should pass away, the Pooled Disability Trust is required to pay back what it can to Medicaid. The grantor can designate an individual or organization to receive the remaining funds." Money in both types of trust can be used for things like "purchasing a wheelchair, dental services, eye glasses, hearing aids, education, recreation and travel, transportation and furniture and clothing," Marcus says. To get started: Read more about Special Needs Trusts and Pooled Disability Trusts on the Commonwealth Community Trust site.

3. Get Professional Help. "Estate planning attorneys, financial planners, and case managers can give their perspective on long-term financial needs that will best suit the 'what if' scenarios," Marcus advises. "Because the regulations are complex and constantly changing, it’s important to select an attorney or nonprofit that specializes in these types of trusts." To get started: Marcus recommends contacting Commonwealth Community Trust (who can administer the trusts and serve as the trustee) and the Special Needs Alliance (who can connect you with an Estate Planning Attorney).

4. Choose a Trustee. "Both trusts require that a trustee be designated," says Marcus. "The trustee manages and invests the funds for the trust and makes disbursements that are for the sole benefit of the beneficiary. The trustee is also responsible for reporting to the government agencies providing the benefits and staying abreast of changing regulations." To get started: Consult a worksheet on selecting a trustee.

5. Choose an Advocate. "Especially in the case of a Special Needs Trust, an advocate is designated by the grantor (individuals funding trust) and is generally someone close to the beneficiary who understands the grantors wishes and the beneficiary’s needs," according to Marcus. "The advocate works closely with the trustee in determining disbursements that will maintain quality of life for the beneficiary. The grantor should complete a set of instructions (forms are available to assist in this) indicating how they want the beneficiary to be cared for including the naming of the advocate." To get started: Write a letter of intent to ensure that those making decisions for your child have the information they need.

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