When you became a parent, the need for a more complex and inclusive estate plan undoubtedly became clear. If you became the parent of a child with special needs, estate planning should have taken on an even higher level of importance. One of the most common tools that parents of special needs children use when planning for the future is a Special Needs Trust. If you are contemplating the addition of a SNT in your estate plan, you need to know what you can, and cannot purchase using the trust assets. For example, can you purchase a home for your special needs child with the trust assets? A Hartford special needs planning attorney at Nirenstein, Horowitz & Associates, P.C. explains what can be purchased using a Special Needs Trust.
Why Is Special Needs Planning Necessary?
Gifting assets directly to your child, either while you are alive or upon your death, could do more harm than good because your child will likely depend on the assistance provided by Medicaid, SSI, and other government programs for life. Once your child is a legal adult, eligibility for those programs will be determined, in part, on your child’s income and assets, and the asset limit is typically as low as $2,000 in countable resources. Your direct gifts, therefore, could cause your child to lose eligibility for assistance. Creating a Special Needs Trust as part of a larger Special Needs Planning component within your overall estate plan is a common solution.
What Is a Special Needs Trust?
A special needs trust, also referred to as a “supplemental” needs trust, or “SNT,” is a specialized irrevocable living trust that allows you to continue to provide for your child without jeopardizing his/her eligibility for assistance. Assets held in a SNT are used to “supplemental” the care and maintenance provided by assistance programs. For a trust to be recognized as a SNT 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 have a special needs planning lawyer assist you. 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. In addition, other family members can contribute to the trust while they are alive or in their own estate plan. Best of all, a special needs trust can continue to provide supplemental financial assistance for your child long after you are gone.
What Can Be Purchased Using Assets Held in a Special Needs Trust?
Once your special needs trust is established, your Trustee must be extremely careful with how the assets held by the trust are used 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 – 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
Of equal importance are the things you 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 use a special needs trust for 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
To ensure that you do not inadvertently cause a loss of benefits for your child, be sure to consult with an experienced special needs planning attorney when creating a special needs trust or when deciding how to use the assets held in the trust.
Contact a Hartford Special Needs Planning Attorney
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about what you can, and cannot, purchase with a special needs trust, contact an experienced Hartford special needs planning attorney at Nirenstein, Horowitz & Associates, P.C. by calling (860) 548-1000 to schedule an appointment.
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