Understanding Special Needs Trusts In Georgia
As a lawyer for more than 40 years, my firm, Charles M. Hall, P.C., has helped countless clients create trusts to care for those they love. One of the most common and useful is the special needs trust. On this page, I’ll explain what they are, how they work in Georgia, and why you may want to establish one.
What Is A Special Needs Trust?
The phrase “special needs trust” is a description of a trust established for a particular type of beneficiary. Usually, the beneficiary is a person with a disability.
The most common form is a trust set up by a parent or parents for a special needs child either by will or in the form of an inter vivos trust. The inter vivos trust can be one that is irrevocable currently, such as a life insurance trust or a trust that becomes irrevocable on the death of one of the grantors and which has other beneficiaries, including one or more of the grantors, with a disabled person as a contingent or residuary beneficiary.
When contemplating a special needs trust, the grantor’s intent is usually to provide, in the future, for some or all of the needs of a child who is incapable of managing his or her affairs, usually because of a mental disability or challenging condition (developmental disability, Autism, traumatic brain injury, etc.). The corpus will be managed by someone other than the special needs child. “Child” as used here does not necessarily mean a minor child.
Other special needs trust may be set up to protect personal injury recoveries received by person with a mental disability or to make some portion of an inheritance available without preventing that person from receiving government benefits such as Medicaid and SSI.
How The Trust May Be Funded
There are two basic categories of special needs trusts, one involving funds from someone other than the beneficiary and the other established with the beneficiary’s funds. The first kind of trust is created using assets and property that do not belong to the beneficiary, i.e., a trust funded by a parent or life insurance using property and assets owned by the parent or a life insurance policy owned by the parent. As mentioned above, trusts can also be created with the beneficiary’s property.
A special needs trust is also a tool that can be used to keep the assets left for the benefit of a special needs beneficiary out of the hands of a court appointed conservator. In the absence of a trust, and in particular, in the absence of a special needs trust, property and income that belongs to a special needs beneficiary, which is managed by a court-appointed conservator, is still considered to be the property of the beneficiary and is therefore subject to government benefit spend down rules, look-back rules and estate recovery rules.
Why Are Special Needs Trusts Necessary?
There are four primary reasons for considering the creation of a special needs trust when using the property or assets of the grantor, as opposed to the property of the beneficiary:
- a special needs trust, with spendthrift language will keep the trust corpus away from the beneficiary’s creditors;
- a special needs trust avoids the application of the “look-back” period, now five years in Georgia, that creates a period of ineligibility for Medicaid benefits, beginning on the date that benefits are sought;
- a special needs trust avoids the requirement that assets be spent down until the nonexempt assets reach $2,000.00; and
- a special needs trust preserves the special needs beneficiary’s eligibility for means based benefits, such as Medicaid and SSI.
Who Can Be A Beneficiary Of A Special Needs Trust?
The beneficiary of a special needs trust should be a person who, due to a mental disability that is not likely to improve, cannot manage his or her own financial affairs and his or her personal affairs. Mentally handicapped or developmentally disabled children and persons suffering from dementia and disabling traumatic brain injuries fit the description of a likely special needs beneficiary. In addition, a special needs trust is most likely to be called for where the person who will fund the special needs trust is contemplating no longer being around to care for or provide for the disabled person.
While anyone can be a beneficiary of a special needs trust, creating a special needs trust to benefit anyone other than a person with mental disabilities or a person who may develop a mental disability in the near future (such as someone who is beginning to show early stages of dementia) is probably pointless and most likely not beneficial to the beneficiary, since all special needs trusts give the trustee absolute discretion as to whether to pay out anything for the beneficiary and absolute discretion as to the amount of any payment.
Why A Special Needs Trust?
Because of the wealth of information available to parents or guardians of a special needs child, the client usually comes to the attorney with a great deal of knowledge and many times has a fair understanding of what he or she is trying to accomplish.
Whether or not this is the case with every client, the attorney should have a comprehensive understanding of what drives the desire to create a special needs trust, besides the existence of a handicapped potential beneficiary.
Potential Uses For A Special Needs Trust
A special needs trust should be considered where :
- Someone wants to provide for a mentally handicapped child or adult
- Someone wants to provide for someone who can not manage his or her own financial affairs and is not likely to ever have that ability
- A parent wants to, as much as possible, make provisions for a mentally handicapped child, whether that child is still a minor or has become an adult
- Someone wants to ensure that financial provisions made for the benefit of handicapped child or other handicapped person are properly supervised and managed
- The parent or in some cases a grandparent have other children or natural beneficiaries who they want to make provisions for, while leaving as much available for the benefit of the special needs beneficiary
- Where there is a sum of money available from some source that is intended to be used for a disabled person who cannot handle his or her affairs, due to lack of capacity, and the grantor wants to keep the money out of the hands of a court supervised conservator and wants some degree of confidentiality or privacy regarding the assets or money
Goals Of A Special Needs Trust
Generally, what a grantor is trying to accomplish with what ends up being a special needs trust are some or all of the following:
- provide for a mentally disabled child or loved one, such as a spouse, after the death of the grantor;
- keep the money left for the benefit of a mentally disabled child or adult beneficiary out of the hands of a conservator or avoid the necessity of the appointment of a conservator with all of the incumbent reports, court supervision, investing limitations and bonding requirements;
- protect as much of the principal as possible during the lifetime of the special needs beneficiary so that some or all of the income and corpus can be used by the trust for the benefit of the special needs beneficiary for as long as he or she is alive;
- to preserve some or even all of the principal for the grantor’s other children after the special needs beneficiary dies;
- to allow the special needs beneficiary to receive as many governmentally provided benefits at the maximum amount allowable during his or her lifetime, without the possibility of spend-down rules that render the beneficiary ineligible for some or all of the benefits or rules that permit the snatch back or recoupment of some or all of the government benefits paid during the life of the beneficiary after the beneficiary dies; and/or
- to enhance the quality of life of the special needs beneficiary.
Preserving Access To Government Benefits
When most lawyers are asked to prepare a special needs trust, the usual intended purpose is to preserve a sum of money or asset for a disabled child without risking access to or eligibility for government benefits. While all of the other reasons are valid and should be addressed, the preservation of access to government benefits is the usual driving force behind the creation of a special needs trust.
Get Your Questions Answered During An Initial Consultation
Charles M. Hall, P.C., is based in Atlanta and serves clients throughout the surrounding areas of Georgia. To learn more about special needs trusts and how I can help you create one that best suits your goals, call me at 404-865-1966 or reach out online.