The Care Of The Incapacitated Adult- Part 4

This is the last of the four part series, "The Care Of The Incapacitated Adult", featuring the Special Needs Trust.

This type of trust is designed to make funds available for the care of the incapacitated person, who needs services and needs that are not provided by their state or other government sponsored programs.

What is a Special Needs Trust?

A Special Needs Trust is not a revocable trust. The grantor creates and funds an irrevocable trust for someone else's benefit, such as a parent for a child, or an adult child for an elderly parent. The trustee is given discretionary power over how to distribute the trust's income. This type of trust is different from a living trust, because it serves to preserve assets which are owned by the client in anticipation of possible long-term disability and the care that would be needed, including custodial, skilled nursing, and hospitalization.

What are some of the techniques of this type of trust?

It attempts to protect the client's assets from any claims by health care providers and government agencies. Without it, public entitlement benefits would be terminated if the trust were counted as a resource.

It seeks to 'impoverish' the client sufficiently so that they qualify for certain types of federal and state assistance. The assets of the special needs trust are not counted for purposes of eligibility under Medicaid. It is important to note that each state has its own asset and income limitations in order to qualify. This type of trust would serve to "spend down" the assets with the use of gifts and trusts, so as not to be disqualified by the asset and income limitations.

What are some strategies of the Special Needs Trust?

Some common spending down strategies would include making outright gifts of property to one's children.

A client could also set up a 'discretionary support trust', and make large gifts to this trust. The assets and income are to be used only at the complete discretion of the trustee, and then only as a supplement to what the client would normally entitled to receive.

The client has the power to appoint an unlimited amount of trust property to family members.

The client has the power to change beneficiaries if he should decide. In this way, he can reallocate his estate among his children

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