Your child undoubtedly brings joy and happiness to your family. Raising a child with special needs though can be challenging and costly. It may also feel as though you are the only parent facing the emotional and financial challenges that often come with parenting a child with special needs. You are not the only one though. Moreover, there are many resources that can help you, such as a special needs trust. A Westport special needs planning attorney at Nirenstein, Horowitz & Associates, P.C. explains what you can, and cannot, purchase with a special needs trust.
Raising a Child with Special Needs
If your child has special needs, the odds are good that he/she will continue to require specialized care as an adult and that care will continue to be expensive. Between therapists, surgeries, specialized equipment, and caregivers the costs associated with a child who has special needs can be daunting. Although your legal obligation to support your child may end when he/she reaches the age of majority, your desire to continue to contribute to your child’s care and maintenance will likely continue.
Care must be taken, however, in the manner in which you provide that financial assistance or you could jeopardize other assistance your child receives from programs such as SSI, Food Stamps, or Medicaid. Many assistance programs have both an income and an asset test that applicants/recipients must pass to gain or retain eligibility. Consequently, an applicant/recipient cannot earn a significant income nor own valuable assets or benefits could be lost. Gifting anything directly to your child, either during your lifetime or in your Will, could cause your child to lose eligibility for much needed assistance programs. Fortunately, a special needs trust can help.
What Is a Special Needs Trust?
A Special Needs Trust, also referred to as a “Supplemental” Needs Trust, is a specialized irrevocable living trust that allows you to make gifts to your child without jeopardizing his/her eligibility for assistance. For a trust to be recognized as a special needs trust by SSI, Medicaid, or other assistance programs, very specific language must be used and the trust must be drafted properly, which is one of the many reasons it is in your best interest to work closely with an experienced special needs planning lawyer when you create your trust. Once created, you can transfer assets into the trust to be used to supplement the care provided to your child by programs such as SSI and Medicaid. Funds held in the SNT can be used to purchase extras such as a vehicle, a vacation, or furniture that is not provided by any of the government assistance programs. A properly drafted SNT can provide for your child both during your lifetime and after you are gone. In addition, other family members can contribute to the trust as well, increasing the assets available to be used for your child’s care and maintenance.
Are You Prohibited from Purchasing anything using a Special Needs Trust?
The Trustee of a SNT must be extremely careful with how the assets held by the trust are used in order to ensure continued eligibility for Medicaid, SSI, and other assistance programs. Funds in a special needs trust can be used to purchase things that are considered exempt for Medicaid/SSI eligibility purposes or for “supplemental” items not provided by assistance programs, such as a vacation. Examples of exempt assets that are not counted by Medicaid or SSI include:
- A primary residence; although, there may be an equity limit
- One motor vehicle
- Home furnishings and personal effects.
- Property essential for self-support
- Assets used toward an occupational goal
- Burial and life insurance policies
There are certain things you definitely cannot purchase using the funds held in a special needs trust or you risk the loss of benefits on the part of the beneficiary. Examples of things you cannot pay for using assets held in a SNT include:
- Cash given directly to the beneficiary for any purpose
- Food or groceries
- Restaurant meals (except if given as an occasional gift)
- Rent or mortgage payments
- Property taxes
- Homeowners or condo association dues
- Homeowners insurance if the insurance is a mortgage requirement
- Utilities such as electricity, gas, and water
- Utilities hookup or connection charges
Contact a Westport Estate Planning Attorney
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about what you can purchase with a special needs trust, contact an experienced Westport special needs planning attorney at Nirenstein, Horowitz & Associates, P.C. by calling (860) 548-1000 to schedule an appointment.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.
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