Special Needs Trusts – Another Exceptional Estate Planning Development

January 25, 2011
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Imagine you have your first child.  Nothing can contain your excitement as you make this foray into adulthood.  However, as the months pass, you begin to observe that something is not quite right.  Your child is not behaving like the others.  You get worried, but friends, teachers, and doctors tell you “kids learn at their own pace” and “don’t compare”.

As time passes, your child cannot speak, walk or run like the others.  Play dates result in tantrums and withdrawals.  Your parents and family start to suggest what you are doing wrong.  You start to believe them, especially given the prevalence of messages such as “over-medication” and “over-diagnosis” we often read about.

You talk to the pediatrician and it is finally suggested that your child get expensive testing.  You are also referred to the county to see if your child qualifies for special education.  Something is found, but you think the tests are wrong.  You fight with the psychiatrist when in fact you are really fighting with the truth.

As time goes on, you blame yourself and question your own abilities.  You read books, research online, and study what you can.  Meetings with teachers, counselors and school officials become a regular way of life.  You become proud when your child puts on a sock, yet angry when your child cannot follow “simple” directions.  You love your child, you love your child, you love your child!

Beyond these everyday concerns is the nagging in the back of your mind concerning what happens to your child once you are no longer around.

Special Needs Trusts In General

This is a wonderful time to be involved in estate planning.  Those in the profession seem to be developing creative ideas that apply to our broadening specialized needs.  One such recent development is the Special Needs Trust.

Here’s the deal.  To qualify for federal Supplemental Security Income (SSI) and Medicaid, the disabled child or adult cannot own any more than $2,000 ($3,000 if married) in “countable assets” (which do not include a home or a car) and must earn less than a certain amount monthly (approximately in the $600-$900 range, depending on the state).  If the disabled person is eligible, SSI and Medicaid payments may be used for necessities such as food, shelter and clothing.

The Special Needs Trust was created to help add a measure to the disabled person’s quality of life as well.  Such a trust may only pay amounts for non-necessities such as going out to the movies, a vacation, etc.  In fact, trust payments for any necessities listed above risks ineligibility for federal benefits. Therefore, the trust must be carefully drafted and followed very closely by the trustee to fulfill its aim.

Self-Settled Trusts

What if no Special Needs Trust is established before your death?  Additional kinds of trusts can be created with the disabled party’s own assets.  By law, assets held in these trusts are not considered “countable” when calculating SSI and Medicaid benefits.  However, any funds remaining in these trusts after the disabled person’s death must first be applied to reimburse the State Medicaid Agency for amounts it paid out for the disabled person’s benefit during his lifetime.

There are three such trusts:

  • The Disabled Individual’s Special Needs Trust – This trust must be set up by the disabled person’s parent, grandparent, legal guardian or the court before the disabled person turns 65.
  • The Miller Trust – In certain states, if a disabled person’s income exceeds the state cap, the court can order that amounts over the cap be paid into the trust so that the disabled person qualifies for Medicaid.
  • Pooled Income Trusts – Non-profit organizations run these trusts that hold money for multiple disabled persons.  While all funds are invested together, each individual’s portion is viewed as a “separate account”.

Increasing Availability of These Solutions

Can estate planning solve all of your child’s special needs concerns and your own struggles as a parent or guardian?  Not at all.

Can these trusts help in all special needs situations?  No – conditions illustrated in the opening paragraphs, such as autism spectrum disorders and ADHD, do not automatically trigger federal benefits.  We are not at a point yet where all needs can be met for all people.

However, it is encouraging that the availability of such programs is increasing.  Families using these solutions can more easily keep their focus on the immediate needs of their special family members.

 Special Needs Trusts – Another Exceptional Estate Planning Development
 Special Needs Trusts – Another Exceptional Estate Planning Development


Scott R. Zucker, Esq. is the owner of The Zucker Law Firm PLLC, located just outside the Capital Beltway in Annandale, within five miles of the City of Fairfax, the county seat of beautiful Fairfax County, Virginia. The firm focuses mainly on estate planning services for Virginia, Maryland and Pennsylvania clientele, and seeks to do so in an affordable and approachable way. People interested in learning more can contact Scott by phone or email.

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2 Responses to Special Needs Trusts – Another Exceptional Estate Planning Development

  1. January 26, 2011 at 9:43 am

    Great post Scott. Once again a great job of explaining some very complex issues in a way we can all understand.
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