What to know about special needs trusts, from costs to seeking help

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Special needs trusts are essential to the well-being of a person with special needs, experts say.

“The most important reason for a special needs trust is that people with special needs are often unable to make financial decisions that are appropriate for themselves and / or are at risk of financial exploitation by others,” the planner said. certified financial Mike Walther, founder of Oak Wealth Consultants in Northbrook, Illinois.

Equally important, according to Charles Italiano, deputy director of Westchester Disabled On the Move in Yonkers, New York, “is to maintain eligibility for public benefits such as [Supplemental Security Income] and Medicaid and enable children with special needs to have a fulfilling life. “

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Why do so many people with special needs need to be assisted by the government?

Because the cost of treatment can be astronomical, said Michael Beloff, partner e Special needs consultant with Belvedere Wealth Partners in Stamford, Connecticut.

For example, daytime support services for a severely injured person can cost more than $ 100,000 per year, while a group home in the Northeast can cost $ 140,000 to $ 300,000 per year, he said.

“Depending on the nature of the individual’s impairment, most families cannot afford to finance these services out of their own pockets during life and after death,” he said. “That’s where Medicaid comes in.”

Since SSI and Medicaid beneficiaries are allowed a limited income and only $ 2,000 in liquid assets, it becomes imperative that families protect assets in special needs funds to ensure that their loved ones do not lose this life-saving government financial support.

Special needs funds should be drawn up as soon as the child has a special needs diagnosis, Walther said.

Two types of trusts

There are two types of special needs trusts. Ideally, you need both, according to Italian.

• Third: “This type of trust is funded with the parents’ money, solely for the child’s need, and will never be in the child’s name,” Italian said. “After the parents die, the funds go to someone other than the child.”

These are often funded with insurance and funds from parental property and can be set up initially without funds, Beloff said.

Once funded, the trust has its own tax code and its own tax return must be submitted. These funds are intended to cover expenses that Medicaid or SSI do not cover, such as travel, clothing, computers, etc.

Beware of conflicts of interest if the trustee is also the ultimate beneficiary.

Michael Beloff

Special needs consultant with Belvedere Wealth Partners

“It’s a way of ensuring that the money will be there and supervised by a qualified trustee, such as a family member, friend, or outside party like a bank or nonprofit,” Beloff said. “Beware of conflicts of interest if the trustee is also the ultimate beneficiary.”

It is important to let other family members know that they should give gifts or bequests to the trust so as to avoid adverse effects on the special child’s eligibility for Medicaid, said attorney Ray Falcon, principal of Falcon Law Group in Woodcliff Lake, in. New Jersey.

• First party: This trust is created with the individual’s assets to protect any income, earned or inherited, in order not to exceed Medicaid’s income and assets limits. Distributions must be approved by the trustee, explained Italiano.

“This type of trust can have a reimbursement arrangement, so that any funds left over after the individual steps go to reimburse the cumulative expenses of Medicaid,” he said.

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