The 1 Unparalleled Tool No Will Should Exclude

John Ross & Lisa Shoalmire Estate,Trust , , , , , ,

In this article, we are discussing an issue that affects older people and younger people, particularly if those younger people have some special needs.


And a lot of times people think about this being a disabled or handicapped individual but that’s not necessarily the case, is it?


A large percentage of the population is disabled.


But just because some people aren’t disabled, doesn’t mean that they can’t become disabled.


So often people have a tendency to plan for today and they look and say:


“Well, you know, it’s me and my wife and we’re healthy and we’re getting ready to retire. We’ve got all these big plans. When we die, we want everything to go to our three beautiful, healthy adult children that have no problems and everything’s great.”


And that’s because everything is great right now.


But when you’re talking about planning for the future, if everything goes great, you don’t need to plan.


That’s not the purpose.


The whole purpose of planning is so that if things go wrong, you’ve got the things in place to protect those loved ones.


One of the most important types of estate planning tools that’s out there


… something called a Special Needs Trust, also called a Supplemental Needs Trust.

Every single estate plan out there oughta have it in there.


What happens if at the time of your death, and you’re leaving assets to these kids, what happens if one of those kids has become disabled and they’re in a nursing home?


So often we think about the older generation being the one that has problems, but that’s not always the case.


We’ve had situations where our clients have had a child who was in a car wreck and has a head injury, or they developed some sort of disease, or Parkinson’s, or early-onset Alzheimer’s.


Or maybe, just in some cases, the older generation just lives a long, long time. One of the funny things about it is, if you get into 80, 90, 100, over 100. If you are 100 years old, my guess is your children are not young, they’re easily in their 80s as well.


My guess is that you don’t wanna leave your assets to a nursing home, you wanna leave them for the benefit of the child in the nursing home, and that’s where the special needs trust planning comes in.


What is it that a special needs trust does?


Well, essentially, we’re talking about someone as a beneficiary if that person is disabled. We can be talking about a spouse with Alzheimer’s who needs long-term care now or will likely need that type of care in the future.


Or we could be talking about a child. Even if that child has a disability and receives certain government benefits that help support him/her.


We’re talking about an estate planning tool that will preserve the benefits that that disabled individual might be receiving.


And often those benefits are so critical.


Those benefits are likely for nursing home care or some housing assistance, or additional assets to pay for the cost of living. More importantly, a lot of times, these benefits are also providing the health care that that disabled individual is able to obtain.


It’s imperative that our families make a plan.


One of the ways we can do that is to set aside assets for those individuals. These assets will improve their quality of life after we are gone. This is something called a Supplemental Needs Trust, also called a Special Needs Trust.


All a trust is, is a stack of paper. But once this trust is created, it’s a legal entity.


And it’s got rules, and it’s governed by the words that are in that trust.


The way a Supplemental Needs Trust works is that the assets are held for the benefit of that disabled person. But they’re held in such a way that they don’t affect their eligibility for Medicaid, or SSI, or other government programs.


There’s actually two types of Trust:


One of them is what’s called a third-party special needs trust.


Now what does that mean?


This is a special needs trust that’s set up by one person for somebody else.


So imagine that my spouse had Alzheimer’s disease and as long as I’m alive, I’m gonna care for her, and I’m gonna take care of her, but with Alzheimer’s disease the life expectancy of the spouse of the person with the disease, is shorter than the person with the disease.


It’s so hard being that caregiver. Often the caregiver dies first. And without that caregiver that wife might now need to go into a nursing home.


Well when I die, let’s say I had just left everything to the wife. Now all of those assets are gonna get eaten up by the cost of the nursing home care before she would become eligible for Medicaid.


But you know what Medicaid pays for?


Its room and board, but it’s not quality of life, it’s not new clothes, it’s not going to the movies.


So if my wife was disabled and she was gonna need some of those cares, I would set up a third-party special needs trust so that when I die, those assets could be held for her but it would not count against her when she needed to qualify for something like Medicaid.


So that’s a third-party. It’s set up by one person for somebody else.


And one of the examples I see a lot that we deal with is grandparents who were perhaps… I had a lady come in and she wanted to leave $10,000 a piece to each of her five grandchildren.


And I asked her if any of these grandchildren had any disabilities.


The grandmother said, “Well, yes as a matter of fact I have one grandchild who has moderate to severe Autism.”


And at that point I suggested that for that particular grandchild’s benefit that she setup this third-party special needs trust.  That money could be used to provide the special things that this child grew to like and brought him comfort and joy as he developed.


If she had gone to someone else who hadn’t set up that special needs trust then that grandchild would have been disqualified from any of his benefits he may have been receiving at the time of her death.


Her money would have gone to pay for basic services instead of being set aside to make sure that he got the special walkers and the special computers that he needed in order to best communicate with his family.


And that’s what this grandmother wanted to do. The third-party special needs trust is a way for others to leave assets for the benefit of that special person.


What if I become disabled, and I had some of my own funds that I want to protect so that I could qualify for things like Medicaid and still have my own personal funds available to me to provide my own quality of life?


So now I wanna use my assets to provide for my quality of life and still have access to things like Medicaid and SSI.


A lot of times we see this in situations where maybe the person has been in a very bad car wreck where they’ve received a head injury and now they’re gonna be getting some personal injury settlement or maybe it’s a disabled person who, their grandparent hadn’t gone gone to an Edler Law attorney.


And that grandparent passed away.


So this disabled person has inherited some money and the receipt of that inheritance has caused them to lose their benefits.


So how do they protect those assets and still keep them?


If you’re under the age of 65, then you can set up what is called a first-party special needs trust. (Notice under the age of 65)


So third-party, setting it up for somebody else.


First-party, setting it up for yourself.


And this can be a way to preserve the assets that you have so that you can get the benefits you need and still have some quality of life.


But again notice I said, it has to be something that’s set up prior to the age of 65.


And that’s not something that we came up with, it’s built into the law.


So first-party special needs trust are actually governed by federal law, these are provided for in the law as a way for people to protect themselves. But that law says you’ve got to do it prior to the age of 65.


You Need More than 3 Hots and a Cot


When I was in the Marines, the drill instructors used to say, “John, we don’t know what you’re complaining about. You got three hots and a cot.”


Well, that’s kind of what these government programs provide, basic care.


They don’t provide quality of life.


It’s up to you to provide that quality of life for that loved one whether that’s your spouse, whether that’s your child or a grandchild or anybody.


Now, you might be thinking, “You know what? I don’t have any disabled members in my family. Everybody is perfectly healthy. My wife’s healthy, my husband’s healthy, our kids are healthy, our grandkids are healthy. Everybody’s healthy.” Well, that’s great now.


It’s really a blessing. Unfortunately, odds are that whether it’s an aging process with you and your spouse, where someone has a sudden health crisis, such as a stroke, or perhaps say diagnosed with a progressive disease like Parkinson’s or Alzheimer’s, dementia.


Oftentimes that healthiness can be such a fleeting asset. We need to plan for the potential that either you, your spouse or one of your family members or loved ones who you intend to share your assets with at some point become disabled somewhere in the process.



Enter the concept of the contingent special needs trust.


Imagine that we looked at a will and let’s say it’s my will and my will says “I leave everything to my spouse. And if she’s not alive at my death, I leave everything to the kids.”


And you know what? I bet if you have a will, your will looks pretty similar. I leave everything to the spouse and when we’re both gone, we leave everything to the kids. That’s what I like to call an ‘I love you will’.


It’s great, there’s nothing wrong with that but let me add a little something here.


What if it said, “I leave everything to my spouse, but if at the time of my death my spouse is a disabled person then instead of going directly to him or her, I want it to be held in a special needs trust for their benefit. And then when they die, that trust terminates and goes to our kids in equal shares, but if one of those kids has become disabled their share could be held for their benefit in such a way that they get to keep their benefits.”


And so, you know what I’ve done here?


If I die everything goes to my wife but if we are in a car wreck or something and I’m dead and she’s got a head injury then instead of leaving it directly, it gets directed over, it gets shifted over.


And the same thing when we go to the kids. We’ve protected those people with this contingency plan.


A contingency plan.


When you say it, it sounds so logical, so reasonable, so appropriate and it really is.


Because if you think about it in the simple will situation where you don’t have the contingent special needs planning, you’re really kind of rolling the dice and assuming that everything is gonna stay in your happily ever after fairytale that you’re living right now, and that’s just not usually the case unfortunately.


So, it’s a simple thing to do.


Too much legal mumbo jumbo?


But one of the complaints I’ve had when I’ve presented this contingent special needs planning to someone in the community has been, “Well, that overly complicates my situation. I don’t like all that, it makes the will too long. There’s a lot of legal mumbo jumbo in there and I don’t like complicated things. I just want to keep it simple.”


And then I usually can tell them a story about a family who had that simple tool of planning and it was such a crisis.


We’re already dealing with the emotional crisis of losing a family member. Then you find out that it’s gonna turn into a financial crisis for a disabled individual, and the process to re-establish those benefits that they’re receiving, can be months and months long.


A few extra words and a little more complication in your will is so worth avoiding those other disasters.

You only care about whether or not it does the job.


You don’t care whether the document is simple or complex.


You have people all the time talk about wanting a simple will.


It’s not the document that you want to be simple, it’s the process. It’s the transition between one life and the next.


It’s passing those assets in the easiest, most convenient and most protected way.


You only care about whether or not it does the job. Don’t get fixated on, “Well, I want you to stick all that on one page.”


How many pages it is, is irrelevant.


What’s important is that it says what it needs to say.


And one of those things it needs to say is that if somebody that you’re leaving assets to is disabled, that their share will be held for their benefit.


A contingent special needs trust, this is not an option, this is mandatory in your will.


And if you don’t have it, you need to be asking questions and saying, “Why isn’t it in there?” Because it really is that important.


The special needs trust, those monies that you set aside for that disabled family member, can be so vital to their quality of life.


Our technology has progressed so quickly. The money you have set aside for that person can purchase things like iPads, so they can FaceTime and visit with other family members through that technology.


They can have higher use wheelchairs that are easier to operate.


There’s special pressure mattresses that make their lives more comfortable if they’re bedridden.


There’s all kinds of things that your resources can do for a disabled person if you plan appropriately.


If you don’t have a will in place or a trust in place, when you go and speak to a professional, ask them about contingent special needs planning.


If you do have those things in place, look back at them and make sure that stuff is there.


It’s that important.



John K. Ross IV



Elder Law Attorney Accredited VA Attorney United States Marine

Lisa B. Shoalmire



Elder Law Attorney Accredited CPA



John K. Ross IV, Lisa B. Shoalmire and/or Ross & Shoalmire, LLP, by way of this article, is not offering legal advice. This article is intended to be for informational purposes only. Before relying on any information contained herein, the reader should consult an elder law attorney. 





The content for this article was taken from the Aging Insight’s live radio broadcast entitled A Special [Supplemental] Needs Trust – Every Estate Plan Needs One!


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