Special needs trusts are part of specific purpose estate planning for families that have loved ones with special needs. These trusts are designed to do two principle things, control access to access so that the assets are wisely used for the needs of the individual with special needs, and to keep assets from against qualification of benefits. This is a relatively new area of law, only coming into real prominence over the past few decades. As this is a new area of law, it has experienced significant development and changes over the past decade. With these changes, some existing trust are no longer providing sufficient protection.
The issues with old special needs trusts typically fall into one of two problems, either they are not sufficient to meet current law, or the are overly restrictive based on the new law. First, there are some trusts that allow for distributions in a manner that is no longer permitted by the Social Security Administration, and therefore having such provisions in the document can jeopardize both Supplemental Security Income (“SSI”) and Medicaid. These trusts either need to be amended, if allowed by the document, to comply with existing law or the assets of the trust moved to a trust that complies with current law. The second type of trust is one that is overly restrictive. Twenty years ago, the law was not settle as to what types of distributions were permitted by law so trusts were overly restrictive. For example, older trusts specified that under no circumstance could the trust pay for food or shelter for the beneficiary with a disability. While such a restriction protects benefits, there may be times where payment of food and shelter are needed from the trust because the beneficiary cannot fully cover those expenses with the payment from SSI. Now that there is better guidance on acceptable distributions, increased flexibility can be built into the documents. Prior trusts can either be amended or the assets of such trusts transferred to a new trust that provides such flexibility.
While it is advisable to review all estate planning every three to five years to stay current with family changes, if you have a special needs trust it should be reviewed if it is over ten years old. Such review will ensure benefits are available and that the trust can properly address the needs of the beneficiary with a disability.