You may have been told, by well
meaning, but probably not well informed friends, that you have to
completely disinherit a child with a disability if you want public
benefits to be available to him or her. This half-truth denies many
children substantial benefits. This difficulty becomes especially
acute when, with the infusion of additional resources, your child's
living conditions could be vastly improved. New techniques and
therapies are constantly evolving. Medicaid and other similar
programs do not pay for the “extras” that can enhance your child’s
quality of life. If publicly funded" programs will not pay for this
care, your child could lose a lot more than mere monetary benefit.
Properly planned and drafted Special Needs Trusts can maximize your
child’s opportunities.
USING A SPECIAL NEEDS
TRUST
Assets that you leave outright to your child may be
"wasted" because they are a "disqualifying resource" for
purposes of programs such as Medicaid. If a trust provides that
the trustee may distribute assets for your child's "support" the
Medicaid rules provide that the trustee's discretion will be
deemed to have been exercised to the maximum possible extent so
that, in effect, the trust will be paying for expenses which
otherwise might have been provided through entitlement programs.
With a conscientiously designed Special Needs Trust, assets may
be available for your child's medical care, educational and
vocational opportunities and for clothing and entertainment
while preserving his or her benefits. The important point in
designing these trusts is to state explicitly and unequivocally
that the trust assets are only for to provide for your child’s
needs not paid for under public programs. If a Special Needs
Trust is carefully drafted, there is a good chance that, under
current Connecticut law, the assets would not be a
"disqualifying resource."
"Self Destructing" Trusts: Suppose that the trust, however well
thought through, is held to either disqualify your child from
receiving entitlement benefits or must have its assets
distributed to a government agency? It might be possible to have
the trust "disappear" if it were successfully attacked. We
could, for example, provide for an alternative distribution to
your other children or family members or to charities in certain
specific circumstances.
A Note of Caution: Although there are several Connecticut
Supreme Court cases which seem to validate the use of
discretionary trusts and although the "self destructing" trust
seems to be "blessed" under principles of general trust law,
their success is not guaranteed. Perhaps to a greater extent
than in the more traditional areas of estate planning, extreme
care must be given to the details of planning and drafting in
order to try to achieve the optimum result.
CHOICE OF TRUSTEES
Both "professional" and "family" trustees have their
strengths and weaknesses. Corporate trustees have access to
professional investment advisors, maintain excellent records and
are generally conversant with tax principles. On the other hand,
administrative officers may have little or no background in
dealing with beneficiaries with disabilities and may, even with
the best of intentions, have such a great workload that they
cannot provide adequate personal attention. Individual trustees
generally have no tax or investment background but are very
close to the beneficiaries and recognize their needs and
potential.
When planning a Special Needs Trust
for your child, you might wish to consider using a corporate trustee
and a family trustee. These provisions have to be drafted carefully
to separate the Trustees’ duties. If two or more trustees are
serving, they normally have to cooperate on every decision. A
trustee selected for its investment expertise may have to deal with
questions of your child’s day to day care. Conversely, a family
trustee may be called upon to participate in investment decisions.
With very careful drafting, we can allocate duties and liabilities
between co-trustees. Another possibility is to have someone serve as
a "consultant" to the trust, without actually being one of the
trustees.
CONCLUSION
If your child has special needs, the "normal" estate
planning process becomes substantially more complex. There are no
generic Special Needs Trusts. There is no such thing as “one size
fits all.” They have to be carefully planned and structured
considering your child’s unique needs and abilities.
This web site is designed to provide information in regard to the subject matter covered. It is made available with the understanding that the Law Offices of Jeffrey L. Crown is not engaged in rendering legal advice via this web site. If legal advice or other expert assistance is required, the service of a competent professional should be sought.
THE LAW OFFICE OF JEFFREY L. CROWN
21 New Britain Avenue, Suite 208
Rocky Hill, Connecticut 06067
