When you have a disabled beneficiary, special needs planning can be a confusing and challenging process. Parents want what is best for their children, but what happens to those children or close disabled family members when their parents or guardians are gone? Placing somebody you trust as their guardian is the first step in caring for them, but what about ensuring they still qualify for government benefits?
Setting up a special needs trust can help take care of your special needs child when you are gone while still protecting their eligibility for the government programs that provide the healthcare and other benefits they need. Do you need help setting up a special needs trust tailored to your special needs individual beneficiary? Contact the Virginia Beach special needs trust attorneys at Montagna Law at 757-622-8100 or through our online contact form. Our law firm can help with your trust planning so your loved one gets the resources they need.
A special needs trust is a special kind of trust that is designed to hold money for a disabled beneficiary. While every trust holds money for the care of someone when you pass away, special needs trusts offer different protection for a disabled individual.
With a special needs trust, the trustee disburses funds to the beneficiary for entertainment, transportation, housing, and other quality-of-life factors not covered by government benefits. At the same time, they can still receive benefits from government programs like supplemental security income (SSI) and Medicaid, so they have the long-term care and peace of mind they need.
The biggest reason to set up a special needs trust is to see that your special needs child or other disabled beneficiary is cared for when you are gone. If you simply leave the beneficiary money rather than setting up a trust, they could lose their eligibility for essential government programs like Supplemental Security Income and Medicaid.
Proper special needs planning can protect your loved one’s quality of life and help them get the care they need while still getting the funds you wish to leave them. The right legal advice from special needs planning attorneys is crucial to get your trust set up correctly.
Special needs trusts are also known as supplemental needs trusts. Virginia has two main types of supplemental needs trusts: first-party and third-party. Choosing the right kind of trust for your specific needs is crucial. Let’s break down how each type works.
A first-party special needs trust is also referred to as a d4A trust in Virginia, after the U.S. Code section which authorizes it. This is a trust created for a disabled person that uses their own money. This type of trust is a special needs planning option that allows you to set aside money for supplemental needs while allowing the disabled beneficiary to remain on public benefits without any risk of disqualification.
What makes this type of trust even more important is that if the beneficiary has already received money or property that has caused them to lose benefits, this type of trust can be used as a tool to hold some of that money for use toward supplemental needs. This will then allow the person to re-obtain public benefits.
First-party special needs trusts must be created before the disabled individual turns 65. They must also be established by the beneficiary’s legal guardian, parent, grandparent, or the courts. First-party trusts must use the remaining funds after the beneficiary’s death to reimburse any Medicaid expenses paid on the beneficiary’s behalf while they were alive. Once this payback is complete, the remaining funds may pass to any other beneficiaries named in the trust. Because of the payback provision, first-party trusts are sometimes called payback trusts.
A third-party special needs trust is created and funded by someone other than the beneficiary to benefit a special needs beneficiary. For example, if you put your money into a trust to support your disabled child, this is a third-party trust. It can be created while the settlor is still alive using an irrevocable or revocable living trust. It can also be established upon the settlor’s death through their will or a living trust.
A third-party special needs trust created and funded while you are alive allows you to bequeath assets into it upon your death. This means that your special needs beneficiary can receive inheritance money from other family members, so long as the trust is properly named as the beneficiary.
What sets a trust apart from a regular inheritance and allows the trustee to continue to receive benefits is that the trust becomes a legal entity that owns the assets it contains. You may, for example, wish to put funds from a life insurance policy into the trust so that it does not provide enough money to your beneficiary that they cannot receive Medicaid anymore. To do so, you must name the trust as the insurance policy’s beneficiary instead of your child.
Because the trust owns the assets, your special needs beneficiary does not lose accessibility to government benefits, but they can still access the property and funds within the trust. These assets can improve care and quality of life for the duration of the beneficiary’s life. Working with an attorney as you create the trust, you will need to provide information regarding your special needs child’s age, current benefits, future benefits, the assets to be placed into the trust, eligibility requirements, and directives stating how you want the trust funds used.
The law does not require hiring an attorney to establish a special needs trust. That being said, the intricacy of establishing the trust without risking eligibility for benefits and the stakes at hand when planning for the future of a disabled loved one make it worthwhile to seek advice from an experienced special needs attorney.
You will need to understand terminology and concepts like settlor, trustee, conservatorship, legal ownership of assets, and many other aspects of trust planning and trust administration. A knowledgeable Virginia Beach special needs planning lawyer can discuss your circumstances, determine the right option for you and your loved one, and help to draft a trust that will comply with Virginia law.
Montagna Law has decades of combined experience in various practice areas, from personal injury to family law, elder law, workers’ compensation, and Social Security disability law. We are experienced in special needs planning and trust administration and are ready to provide the legal advice you need for your Virginia Beach estate planning to help your disabled loved one retain accessibility to the public benefits they need.
Every parent wants to be sure their children are cared for when they are gone. Let us help you with the careful planning and execution of your supplemental needs trust. We care deeply about our clients and are here to protect you and yours. Contact us at 757-622-8100 or reach out through our contact form to talk to a member of our team today.