As a part of our recent focus on trusts and estates, the topic of our most recent radio program on Saturday afternoon was Special Needs Trusts, which are becoming a much more frequent part of family estate plans.
We covered several aspect of the complex topic of Special Needs Trust, but only scratched the surface of a process that involves legal issues at the federal, state, and local levels, as well financial considerations and transactions that may change over time depending on possible future revisions to related laws and tax codes.
Some of the points we discussed on the show were:
- The different types of Special Needs Trusts, which serve various circumstances, are referred to by several different names, which can cause confusion, such as: first-party, self-settled, third-party, sole-benefit, family-type, living, inter vivos, type A, court-order, and pooled.
- How receiving lump sums of government benefits could disqualify a beneficiary, as well as the terms that fit within government criteria.
- The different types of disabilities that are covered by a Special Needs Trust, such as general old age, victims of accidents, children with conditions such as autism or Downs Syndrome.
- The extended power of discretion available to a Special Needs Trustee, compared to the trustee of a standard trust fund, as a means providing the flexibility needed to deal with changes to laws and regulations.
- The types of individuals who might be best suited to serve as a Special Needs Trustee, as well as the complexity and time-requirements of the position and the conflicts of interest that can arise in managing a Special Needs Trust.
- Allowable expenses for taking care of the Special Needs Trust beneficiary.
- Tax filing requirements for Special Needs Trusts.
- The circumstances under which a court might establish a Special Needs Trust.
- Court petitions to protect trustees from future lawsuits by adding a layer of transparency to decision-making processes.
- The general basis for someone being the beneficiary of a a Special Needs Trust: not being able to manage day-to-day personal finances, due to conditions such as mental or physical disabilities, or temporary incapacitation from drug/alcohol dependency.
- Estate plan “Living Trust” clauses that allow for Special Needs Trusts to be set up in the future, for cases such as known family hereditary diseases that may arise.
- Trust protectors who have the power to remove a trustee without court intervention.
- The serious implications, and the long-term negative impact on a beneficiary, of incorrectly setting up a Special Needs Trust.
Though it is possible to legally establish a Special Needs Trust by yourself, the complexity of the laws and regulations involved, along with the implications of making a mistake in the process, really do warrant consulting with experts in this area rather than handling it alone.
Here are a few resources about Special Needs Trusts:
- What is a Special Needs Trust? – Proxy Parent Foundation, a dba of Planned Lifetime Assistance Network (PLAN) of California, is a 501(c)(3) nonprofit, serving disabled people since 1991.
- Special Needs Estate Planning Guidance System – National Alliance on Mental Illness (NAMI) is dedicated to improving the lives of individuals and families affected by mental illness. Founded in 1979, NAMI has established itself as a formidable national grassroots mental health advocacy organization.
- Special Needs or Supplemental Needs Trusts – World Institute on Disability (WID) was founded in 1983 with a mission to eliminate barriers to full social integration and increase employment, economic security and health care for persons with disabilities.
- Administering a Special Needs Trust: A Handbook for Trustees (2011 edition PDF) – Special Needs Alliance (SNA)
- Legal Matters to Consider – Founded in 2005, Autism Speaks has grown into the nation’s largest autism science and advocacy organization, dedicated to funding research into the causes, prevention, treatments and a cure for autism; increasing awareness of autism spectrum disorders; and advocating for the needs of individuals with autism and their families.
- Special Needs Trusts FAQ’s – FindLaw.com.
- First Five Things to Do: Special Needs Trusts – About.com
The Law Offices of Connie Yi, P.C. is uniquely qualified to help you determine if your family should establish a Special Needs Trust and then, if it is appropriate for your situation, help you properly establish it and create the proper financial strategy to support it as long as is needed. Connie Yi is a San Francisco Bay area estate planning and tax law attorney, as well as a highly-experienced Certified Public Accountant.
To schedule a free consultation about a Special Needs Trust as a part of your estate plan, please contact us. For your convenience, we have four conveniently located offices in the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.
The time to file annual taxes is almost here (and don’t forget that 4th-quarter taxes need to be paid January 15th), so next week on our radio show, we will discuss the “Do’s and Don’t’s of a Tax Audit,” so please tune into this timely upcoming show on Saturday, November 12, at noon, on AM 1220 KDOW.