How to Create a Special Needs Trust: What to Include

A Special Needs Trust (SNT) is a unique document individually prepared for the benefit of a disabled beneficiary under the age of 65. If you are the grantor of this type of trust, that is, the person setting it up for another’s benefit, you will need to assist your attorney by gathering all the required information, including an individualized life care plan that focuses on the special needs of the disabled individual (the beneficiary).

What Information Do You Need for Your SNT?

Information you will need to provide your attorney includes:

• The beneficiary’s likes, dislikes, daily habits and specific needs. Although your attorney is knowledgeable about disabilities, their causes and their effects, only you, as the grantor and likely a family member, knows the individual well. The more information you can provide to your attorney about the beneficiary, the more complete and effective the trust document will be. Information such as personal habits, favorite foods, the ability to handle money and the need for adaptive equipment may seem simple enough, but it is all a vital part of a SNT.
• The beneficiary’s medical diagnosis. A report from his or her physician would be very helpful in this regard.
• The disabled individual’s social security number.
• The sources for and amounts of funding for the trust, including names of institutions and account numbers.
• name, address and phone number for the person you have selected to be the trustee (the person overseeing the trust), and the same information for a successor or alternate trustee.
• Information on what you would like done with the remaining funds in the trust when the beneficiary passes on and Medicaid, if necessary, has been reimbursed.* Some prefer to leave the remaining funds to one individual, others to several, and/or to a charitable organization.

How an Attorney Can Help

Your attorney will help you get a tax identification number for the trust so you can report any and all trust income to your state and to the IRS. He or she can also assist with execution of the document when it has been completed.

Your attorney knows that at a bare minimum, the trust should state that it is intended to provide supplemental and extra care over and above that which the government provides. It must state that it is not intended to be a basic support trust, because that would likely disqualify the beneficiary from receiving government aid. The trust must reference the Social Security Operations Manual’s portions that authorize the creation of the trust plus other government-required language. Creating a SNT on your own is not advised since these trusts have some stringent government requirements.

As long as you are working with an experienced attorney who has created many special needs trusts, he or she will be able to help you with some of the tough decisions you will have to make while preparing it because he or she has experience in working with disabled individuals’ families to create estate planning documents. The attorney may have inventive suggestions or informative answers to some of the issues with which you are faced. He can certainly tell you what is and is not possible to do within the pages of the trust. It is important to note that although your attorney’s expertise will be very helpful in making some of the decisions you will need to make with the SNT, many of the final decisions must be made by you, the grantor.

*The only assets within the trust that are subject to the repayment obligations are those assets which originally belonged to the beneficiary him or herself that are transferred into the trust. Examples are such assets as earnings from a job, savings, certain Social Security back payments, personal injury recoveries which are not court-ordered into the trust, and the like. The beneficiary’s estate then might be liable for an amount equal to the Medicaid used during his or her lifetime. It is not uncommon for a trustee or a beneficiary to ask a court to direct certain assets into the trust. In that event, those assets may not be subject to the repayment provision, such as an inheritance.

Case Studies: Special Needs Trusts

Case Study 1: John’s Special Needs Trust

John is a 20-year-old with special needs, and his parents want to create a special needs trust (SNT) to ensure his future financial security. They consult with an experienced attorney who helps them gather all the necessary information, including an individualized life care plan for John.

The attorney assists in obtaining a tax identification number for the trust and ensures that the trust document includes the required language to qualify for government aid. John’s parents rely on the attorney’s expertise to make informed decisions throughout the trust creation process.

Case Study 2: Sarah’s Trustee Request

In another case, Sarah, a beneficiary of a special needs trust, wants to request the court to direct certain assets into the trust. She seeks legal guidance from her attorney, who explains the potential implications of this request.

The attorney informs Sarah that assets transferred into the trust from her personal earnings, savings, or certain payments may be subject to repayment obligations. However, assets directed by the court might be exempt from this provision, such as an inheritance. Sarah relies on her attorney’s expertise to navigate the complexities of her trustee request.

Case Study 3: Thomas’s Estate Planning Challenges

Thomas is a grantor who wishes to create a special needs trust for his disabled child. However, he faces various challenges and tough decisions during the trust preparation process.

Seeking the assistance of an experienced attorney, Thomas benefits from the attorney’s previous work with families of disabled individuals. The attorney provides creative suggestions and informative answers to address the specific issues Thomas encounters. While the attorney’s expertise is invaluable, Thomas ultimately makes the final decisions as the grantor of the trust.

For more information about special needs trusts, see the following articles:

• Special Needs Trusts Overview
• Types of Special Needs Trusts and Who Can Set Them Up
• Who Should Have a Special Needs Trust
• How to Fund a Special Needs Trust and How the Money May Be Spent
• Special Needs Trusts and Eligibility for Federal and State Assistance