Special Needs Trusts 101

Every October, the National Academy of Elder Law Attorneys celebrates National Special Needs Law Month as a way to educate and raise awareness about planning for loved ones with developmental disabilities. While many families are aware of the benefits of common estate planning tools under Michigan probate law, such as wills and trusts, not as many are familiar with the "special needs trust." If a family member suffers from a disability-related condition, you should discuss your situation with a Michigan elder and disability lawyer to determine appropriate planning strategies. However, here are some answers to the most frequently asked questions about special needs trusts.

What is a special needs trust?

This type of trust was created so that a person could leave assets for a disabled loved one without disqualifying that person from eligibility for public benefits. Directly bequeathing your estate assets by will to this family member may make him or her "too rich" to qualify for benefits; the special needs trust takes these assets out of consideration for government programs and allows the funds to be used for certain designated purposes.

How do special needs trusts work?

Like other types of trusts, a special needs trust involves a grantor who places property under the control of a trustee to manage the trust assets. The trustee manages the property according to the terms of the trust and for the benefit of the person with special needs, known as the beneficiary. In most cases, the person creating the trust acts as grantor until he or she dies, can no longer act, or resigns. The special needs trusts will also appoint a successor grantor to act in the future.

What are the obligations of a special needs trustee?

The trustee is required to adhere to the terms and conditions of the special needs trust, which typically involves making proper distributions of funds as necessary for the care and comfort of the beneficiary. In addition, the trustee must adhere to state and federal law governing public programs for disabled individuals to ensure the beneficiary is not disqualified from benefits due to an improper distribution from the trust.

What costs does a special needs trust cover?

Trust funds can be used for a wide array of purposes, so long as the distribution does not contravene the trust terms or applicable law. Funds from a special needs trust can be applied toward:

● Caregiving services not paid for by Medicaid;

● Travel, certain entertainment offerings, and other experiences;

● Basic services, such as cell phone, internet, or home maintenance;

● Pet care, expenses, and medical treatment; or

● Personal items, including clothing, shoes, books, and furniture.

A special needs trust is an effective way for families to ensure the future care for relatives with developmental disabilities, but it's critical to have the assistance of counsel when drafting the relevant documents. Elder and disability attorneys have the experience and knowledge to help you develop an appropriate arrangement that bests suits your needs. For more information on special needs trusts and other financial planning for the developmentally disabled, please contact the lawyers at the Nawrocki Center for Elder Law, Special Needs & Disability Planning.

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