Articles Posted in Special Needs Trusts

One of the most important, but most often overlooked estate planning documents, are the Powers of Attorney. Powers of Attorney fall into one of two categories: (1) Powers of Attorney for Property and (2) Powers of Attorney for Health Care. Essentially a Power of Attorney legally authorizes a trusted family member or friend to make decisions on your behalf in the event that you become incapacitated or are unable to make decisions on your own. Powers of Attorney are powerful documents that can protect you and your family from the need for expensive guardianship proceedings.

Although Powers of Attorney for Health Care are regularly accepted by hospitals and doctors, many banks and financial institutions are making it harder and harder to use a legally valid Power of Attorney Document. If a manager at your financial institution believes, in good faith, that your Power of Attorney is no longer valid you may be left with no choice but to petition a court for guardianship.

To avoid this from happening we advise that you review your Powers of Attorney to ensure (1) the your Power of Attorney documents are up to date and include the most recent statutory language; (2) that your Powers of Attorney are no more than 5 years old; and (3) that your Power of Attorney allow sufficient authority for your agent to amend trust documents, make gifts, and designate or change beneficiaries.

In a time when advances in medicine are providing longer, more fulfilling lives for our family members with special needs, it is more important than ever to take advantage of all the financial planning tools available for their specific needs.

The Illinois ABLE Act provides for a new tax-advantaged investment program that allows a blind or disabled person (or their family) to save for disability related expenses without jeopardizing the disabled individuals means tested federal benefits. Unlike the assets of a traditional Special Needs Trust, ABLE account assets can and should be spent on expenses related to the family member’s disability. These expenses include education, housing, transportation, employment training, assistive technology, personal support services, health, prevention and wellness, financial management, legal fees, and funeral/burial expenses.

A properly established ABLE account will allow a disabled individual to save up to $100,000 in their own name. The disabled person or their family may contribute up to $14,000 per year into the ABLE account without effecting eligibility for SSI or other federal means tested programs. Although the Illinois State Treasurer’s Office is responsible for administering the ABLE program, the funds are privately held assets that are totally controlled by the account holder.

A Special Needs Trust (“SNT”) or Supplemental Needs Trust is a certain type of trust which can be used for goods and services that governmental programs will not cover.  The SNT must have special language within the trust such as: “This trust shall be used to supplement and not supplant governmental programs”.  Having such necessary language, the assets in the trust are not counted against the special needs beneficiary as an asset in determining eligibility for governmental programs such as Medicaid and Supplemental Security Income (SSI).

There are two types of SNTs.  The First Party SNT is funded with the special needs person’s own funds.  For instance, if a person with a disability is awarded monies from a settlement from an auto -mobile accident, those funds can be placed in a First Party SNT to preserve the eligibility for SSI and/or Medicaid.  The same process can be used for when a special needs person inherits a sum of money outright.

There is one disadvantage with the First Party SNT.  When the beneficiary dies, Medicaid will send a bill to the Trust for the monies spent by that program during her life.  The trust must pay back Medicaid the amount of the bill. However, if the trust assets are less than the Medicaid charge, Medicaid will absorb the balance of its bill.  If there is a balance after paying the Medicaid bill, the proceeds may be distributed to family or anyone who is a distributee of the Trust.

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