The following is a case study about the value of special needs trusts for adults.


Maria and Sean have a 41-year-old son, Joe, who has schizophrenia. He lives at home with them. The couple are concerned about protecting Sean's welfare when they might no longer be able to care for him due to their own age or infirmity, and when they die. The couple doesn't have relatives who would be willing to look after their mentally disabled son, and they need to make arrangements for Joe's future.

Maria and Sean own their home, invest in a 401(k) and have life insurance. Together, their net worth is about $800,000. Currently, Joe receives Supplemental Security Income payments and Medicaid health insurance coverage.

He also just became eligible for a group home environment. These types of housing facilities for the mentally disabled are usually run by nonprofit organizations.

Maria and Sean's greatest concern is what will happen to their son when they are no longer able to take care of him. They are also concerned about whether he will be able to manage the assets so that they last as long as possible? If he receives a large lump-sum inheritance from his parents, he will exceed SSI's asset limit (less than $2,000) and lose his benefits. If he loses SSI, he will also become ineligible for Medicaid for his health benefits.

A special needs trust, or SNT, might be the answer for Maria and Sean. The trust allows a person who is disabled to supplement his or her public benefits, which might include SSI, Medicaid, special housing, and other federally or state sponsored assistance programs. The SNT can:

Help maintain an individual's potential eligibility for a group home; Purchase a home for the individual; Pay for services that Medicaid might not cover, including home care and wheelchairs, handicapped-accessible vans and mechanical beds; Pay for a personal attendant; and Pay for recreational and educational activities.

The two key requirements for a SNT are that a trustee must be given absolute control over the distribution of funds, and the person with special needs cannot have the authority to revoke the trust.

Selecting a trustee for the SNT is one of the most important steps in the planning process, because the trustee will be empowered, in essence, to manage the life of the person with special needs.

Although family members may serve as trustees, they often do not possess the necessary characteristics, such as long-term commitment, a special sensitivity to the individual's disabilities, active involvement in monitoring the client's services, the ability to advocate for medical entitlements in the rapidly changing field of mental illness, and the ability to prudently invest and distribute funds.

It is often recommended, therefore, that families retain a professional trustee to oversee the SNT, with a family member named as co-trustee. Examples of professional trustees might include a bank, a CPA or an elder-law estate planning attorney.
Bonnie Kraham