Special Needs Trust for Adults

Case Study: Maria and Sean have a 41 year-old son, Joe, who has schizophrenia and bipolar disorder. He lives at home with his mother and father. The couple is concerned about protecting Sean’s welfare when they can no longer care for him and when they die. Because the couple doesn’t have relatives who would be willing to look after their mentally disabled son, they need to make arrangements for Joe’s future.

Maria and Sean own their home, invest in a 401(K), and have life insurance. Together, their net worth is $800,000. Currently Joe receives Social Security Income (SSI) payments and Medicaid health insurance coverage. He just became eligible for a group home environment.

These types of housing facilities for the mentally disabled, usually run by non-profit organizations, have increased steadily over the last few years. Click here for the Human Development Services for more information in Westchester County http://www.hdsw.org/. Or search the Internet for “mentally disabled housing” in your New York State county.

Maria and Sean’s greatest concern is what will happen to their son when they are no longer able to take care of him. Also, when Joe receives an inheritance from his parents – will he consistently be able to manage the assets so that they last as long as possible? Also, if he receives a large lump sum inheritance, he will exceed SSI’s $ 2,000 asset limit per month (at the time of this writing) and lose his benefits. If he loses SSI, he will become ineligible for Medicaid.

Their first step is to consult a special needs qualified elder law estate planning attorney in New York State.

The second step is for Maria and Sean to learn how a Special Needs Trust can help a person who is disabled as a way to supplement this person’s public benefits which may include SSI, Medicaid, Section 8 housing, and other federally or state sponsored assistance programs. This trust can:

  • Help maintain an individual’s potential eligibility for a group home,
  • Purchase a home for the individual,
  • Pay for services that Medicaid may not cover, including home care and wheelchairs, handicap accessible vans, and mechanical beds,
  • Pay for a personal attendant, and
  • Pay for recreational and educational activities.

The two key requirements for a SNT are that a trustee must be given absolute control over the distribution of funds and the person with special needs cannot have the authority to revoke the trust.

Selecting a trustee for a SNT is one of the most important steps in the planning process, because the trustee will be empowered, in essence, with managing the life of the person with special needs.

While family members can serve as trustees, they may not possess the necessary characteristics of a SNT trustee, like long term commitment, a special sensitivity to the individual’s disabilities, active involvement in monitoring the client’s services, the ability to advocate for medical entitlements in the rapidly changing field of mental illness, and be a prudent investor and distributor of funds.

It is often recommended, therefore, that families retain a professional trustee to oversee the SNT, with a family member named as co-trustee. Professional trustees may be located at a trusted bank or New York elder law estate planning firm.