2 Spectacular Ways to Make Special Plans for Special People

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Using Special Needs Trust to Plan for the Disabled


Caregivers for people who are ill, aged or disabled are the unsung heroes among us. These caregivers are often on the job 24 hours a day, seven days a week. They care for someone in their lives who has limitations preventing her/him from living independently. The subject of this care may be a child with Down’s Syndrome or it may be a spouse with Alzheimer’s disease.
These caregivers stand as a buffer against the world. They make sure that their special someone has:

  • a safe, clean place to live
  • nutritious meals to eat
  • a capable medical team to treat them
  • and love and a affection to enhance their lives.


The biggest fear these caregivers often have is a day when they cannot be there to care for their loved one.

Planning is Imperative


If someone with special needs depends on you to care for them, you must plan for the day when you cannot be their caregiver. A Special Needs Trust can hold assets for the benefit of the disabled individual.


It allows you to leave money for the care of your loved one. This won’t disqualify them from Supplemental Social Income (SSI) or government healthcare benefits such as Medicaid.
The government support programs for the disabled are an important safety net for disabled persons. They often may be the only source for healthcare coverage.
With even a small inheritance or gift outright, s/he may immediately lose access to benefits until they spend these assets. The disabled person then has to reapply for these benefits which may take time to process.
Special Needs Trust (SNT) assets left by the caregiver or others are not counted as a resource of the disabled person.
These assets may be used to enhance the quality of life of the disabled person, beyond the modest government programs available to them.
Most importantly, assets held in a SNT do not disqualify the disabled person from:

  • health coverage
  • housing benefits
  • disability payments




A trust is a legal entity that can hold assets for the bene t of someone else.


For instance, a parent may create a trust by signing a trust document creating one for the benefit of a disabled child.


The trust document will name the beneficiary (the disabled person). The trust will also name a trustee, the person who can manage the assets placed into the trust and make disbursements to the beneficiary.



There are two main types of SNTs: a First Party SNT and a Third Party SNT.

First Party SNT


A first party SNT is funded using the beneficiary’s own assets.


Such as a Court created trust for the disabled beneficiary. Funding might come from a legal settlement from a personal injury lawsuit which was the cause of the individual’s disability.

Third Party SNT – the most common SNT


This is a trust set up by third parties, such as parents of a disabled child.


Parents can create the trust today to hold assets for their disabled child. They can be created even while they are living. Or they can put a provision in the Last Will and Testament that creates the SNT at their death.

bustedThe Payback Provision


When the disabled beneficiary dies, assets which remain in a First Party SNT must be paid over to the State that provided any government support to the individual during his or her lifetime. This is called a “payback provision.”


In contrast, any assets which remain in a Third Party SNT at the disabled person’s death may be disbursed to other surviving family members or other named beneficiaries. There is no payback requirement for a Third Party SNT.



A special needs trust is definitely not a do-it-yourself project. There are many federal and state laws, as well as administrative rules, which must be carefully followed in setting up and running a SNT.


A misstep, even an unknowing one, can cause the trust to be “busted”. The assets will be drained out without benefiting the disabled individual.


An attorney who specializes in SNTs will know best how to create the trust for your individual circumstances. They will build in as much flexibility as allowed under the current laws and rules which affect SNTs.



If you are setting up a Third Party SNT, you will need to:


  • estimate how much assistance the beneficiary will need over their lifetime
  • determine what the source of those funds may be
    • while you are living and able to care for them
    • and after you are deceased.


This may mean you name the trust as a beneficiary of life insurance policies, retirement accounts or even place your residence in the trust for the benefit of your disabled family member.


If you create a Third Party SNT while you are living, you can even encourage other family members to make gifts to the trust. Their gifts can be made either while they are living or through their own estate planning.



The Trustee is responsible for managing the assets of the trust, filing tax returns if required, and disbursing assets for the benefit of the disabled person.


SNTs can be challenging to operate properly because of all the rules which have to be followed.


Some family members are simply not equipped or are unwilling to learn to be a good trustee.


Many who create an SNT appoint a professional trustee, such as a bank trust officer, to make sure all the rules are followed and the trust is not “busted”.


The trustee makes sure to maintain the assets in the trust and are kept safe. They must make sure to meet the needs of the beneficiary.


The Trustee may use funds in the trust to pay for medical expenses not otherwise covered like:

  • special medical equipment
  • in-home caregivers


The trustee may also pay for quality of life enhancements for the disabled individual such as:

  • cable television
  • tablet computers
  • vacations
  • entertainment




By utilizing an SNT, caregivers get peace of mind that, even after they are gone, their disabled loved one will have resources at their disposal to enhance their lives while still maintaining eligibility and medical benefits.


You should speak to an Elder Law attorney about your situation if you are caring for a special needs person and create a plan of care.


Lisa Shoalmire


Elder Law Attorney


Accredited VA Attorney


Lisa Shoalmire, John Ross 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.

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