A SPECIAL NEEDS TRUST CAN BE THE BEST WAY TO PROVIDE FOR A DISABLED OR HANDICAPPED PERSON

By Frank A. Jones

Many people face the challenge of supporting a disabled or handicapped child. The real problem is how to fund the lifetime needs of that child after the parents are no longer alive. Many parents may not realize that a direct inheritance may cause problems for the disabled child. Under current law, assets of more than $2,000 can disqualify disabled individuals from receiving federal or other needs-based assistance.

One solution may be to establish two trusts for the disabled person. The major portion could fund a trust for the express purpose of support for the handicapped beneficiary. A smaller amount could fund a Special Needs Trust ("SNT"). When all of the funds in the "support" trust are expended, the handicapped person would then be eligible for public benefits. The SNT would still be available to provide any needs not covered by the public benefits.

A Special Needs Trust offers a way to protect the child's eligibility for needs-based public benefits. This article hopefully will make people aware of SNTs and encourage them to seek counsel from an attorney who specializes in this complicated area of the law.

The SNT must be carefully drafted to make sure it provides for "supplemental care" only. It must be very careful to avoid being classified as a "support" trust by a court. The SNT should be a secondary source of benefits for the disabled beneficiary. The beneficiary's basic general support will be provided by other resources or by needs-based public benefits, i.e. Social Security Disability or Supplemental Security Income and/or Medicaid. A SNT if properly drafted, will not disqualify a person from receiving public benefits once all other resources have been depleted.

The SNT can provide for any needs not covered by public benefits, including medical, residential and social needs. Special Needs Trusts typically provide medical and dental expenses, annual independent checkups, vehicle purchases, training and rehabilitation, and essential dietary needs. The SNT can also provide the beneficiary with vacations, computers, and other items. The SNT assures the disabled person a better quality of life over and above the basic needs furnished by public benefits.

I cannot stress enough the necessity to get the best legal help available from attorneys who specialize in this area of estate planning and trust law. This is not a "do-it-yourself" project.

This article was first published in The Best Times, January 2006.

Frank A. Jones is Director of Cumberland Trust & Investment Company. For ten years, he was an investment columnist for The Commercial Appeal newspaper in Memphis. He can be reached at fjones@cumberlandtrust.com.

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