A special needs trust is a very specific type of trust.  These trusts are usually created for the benefit of a child with severe physical or mental handicaps, although they can also be created to benefit an elderly person with similar handicaps.  Special needs trusts supplement New York wills rather than replacing them as an estate planning device.

New York law allows for the creation and funding of a special needs trust.  Very few New York families have taken advantage of these trusts, although in recent years there has been more interest in them.  This has corresponded to a significant increase in the number of children being diagnosed with autism and other disorders.

A special needs trust is designed to provide for the well being of a child while preserving government benefits.  Most parents take good care of their children with special needs, but when the parents get older and eventually die they are no longer able to continue to provide this care.  Inevitably, a special needs child will qualify for New York State or Federal benefits.  These benefits may include basic health insurance, housing, and money for food.  However, these benefits usually fall short when it comes to covering all the needs and expenses of the average person.  For example, eye glasses are frequently not covered, and anyone who needs them will have to pay for them out of their own pocket.  Also, in the area of housing, government benefits will frequently only pay for crowded institutions.  These facilities may not be the best environment for a child or young adult with special needs.

I order to insure that your special needs child is taken care of in the standard to which they have been accustomed, you should create a special needs trust.  These are unique trusts that supplement government benefits without replacing them.  A trustee governs all payouts, and the beneficiary themselves will not have a say in how the money is handled.  This is appropriate for most people with special needs, though, and the trustee will essentially take the place of the parents when it comes to financial decisions.

Let’s look at two examples.  Child #1 is cared for by his parents until they have to go to a nursing home.  A few years later they die and leave $500,000 to the child.  The surrogate’s court appoints a guardian for the child, and the $500,000 is spent on behalf of the child.  When Child #1 is 38 years old, though, the money runs out after he requires a medical procedure.  Child #1 is now assigned to a case worker and placed in an institution where he has to share a room and other facilities.

Child #2 is similarly cared for by his parents until they grow old and die.  Rather than leave the money outright to the child, though, his parents have created a special needs trust and left all their money to it.  Child #2 thereby receives government benefits including Medicaid, and the $500,000 special needs trust is used by the trustee to cover things that government benefits will not pay for such as eyeglasses, meals in restaurants, and a trip to Disney World.  Child #2 is well provided for, and never ends up relying entirely on government benefits or living in an institution.

A special needs trust does not have to be funded immediately.  Most people provide for the trust to benefit their child via their estate or a life insurance policy.  New York wills are valuable estate planning tools, but they are no substitute for a special needs trust.

For more about a special needs trust, contact a law firm such as Myron Landis & Taft at www.nyhomelaw.com

Feel free to contact Eric by e-mail at Eric@nyhomelaw.com

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Filed under: Special Needs Planning

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