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Special Needs Trusts

Special Needs Trusts

There are several types of Special Needs Trusts that attorneys use to protect a person with disabilities from being considered over-sourced in the eyes of state and federal agencies.

First Party Special Needs Trusts

One of the primary considerations is whether the person with a disability is under 65. If that person is under 65 and has capacity to sign a trust, they have a right to establish an Special Needs Trust with their own assets that functions similar to an Estate Plan, whereby their accumulated earned assets; funds received after suffering a personal injury; a sudden receipt of a substantial inheritance; or work related injury settlement after they have become legally disabled can be held in a trust for their sole benefit for the rest of their lives, on the condition that the remaining assets be paid to the State of Illinois for any and all Medicaid expenses the State has paid on their behalf, at the Medicaid rate, upon their death. It is an important planning consideration to establish a funeral or cremation plan before funding this trust to cover this expense because it is not allowed to be paid until the State has been paid first.

Another version of this trust would use a professional trustee to hold the trust assets safely for the rest of the beneficiary’s life with a collection of other trusts that the trustee is managing. This is called a Pooled Trust and it is very good if the beneficiary has a fairly large trust and needs it to be securely managed by a professional trustee. The fees are more numerous, but it is secure. Guardianship Courts often insist on this type of Special Needs Trust, if one is being considered for the Ward.

Third Party Special Needs Trusts

The Third Party Special Needs Trust is a trust that is either established through a person’s Will or Trust to protect one or more of their beneficiary’s public benefits and allow them to enjoy the benefit of their inheritance. This is less expensive for the person establishing the trust, however, anything placed in this trust will be done using only assets from this person establishing their Will or Trust. It is recommended to have a Special Needs Trust in most Wills and Trusts as a safeguard, due to the advantages that are offered to descendants with disabilities and this is true for wealthy clients who want their children to have the benefit of living in a community of their peers and not subject to neglect.

The alternative to establishing the Third Party Special Needs Trust through a Will or Trust is to establish a separate stand-alone Special Needs Trust that can have friends and family contribute to it, immediately, if desired. Parents of children with disabilities often fund these trusts with Life Insurance policies to avoid taxation and capital outlay. An elder over 65 can have a Third Party Special Needs Trust established on their behalf by friends or family members.

When a parent is planning for long term care and wants to save assets for a child with a disability they may establish a Sole Benefit Trust, which is a hybrid that requires some extra planning steps to be Medicaid compliant, however, it is useful for helping that child receive an inheritance with the State’s blessing and no penalty placed on the transferring parent.

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I found Mr. Story on a website - I live in Texas but had a matter taking place in Evanston, IL and I needed legal assistance. I'm certain that Mr. Story is a busy man but he listened to my long, detailed issue. He asked questions - he was genuinely concerned and gave me excellent information so that I could move forward. It's so hard not being in the same state when you are trying to take care of an important matter. He took the time to walk this through with me and I was so grateful that I found him.

~ Monica July 16, 2019
Lifesaver

I hired Jeffrey to help me navigate the paperwork for my mother’s Medicaid application. I was being 100% honest on the application, but I knew there were going to be things in our case that looked odd to the caseworker. How true this turned out to be. The application was ultimately approved, but it took nearly a year. In that terribly stressful time, through every additional set of document requests, I relied on Jeffrey’s advice and counsel. He kept me calm, focused, and on track. He knew when to push back when the requests were ridiculous, and when to seek additional advice when they were baffling. And through it all he never billed me for a single dollar more than the flat fee I paid up front. I highly recommend Jeffrey.

~ Frank September 8, 2015
Will & Trust

Jeff executed a Will and Trust for my elderly mother. He gave us expert advice and helped my mother enormously with a contentious situation. We initially contacted Jeff because he specializes in legal affairs for the elderly and found his knowledge and sensitivity to issues most reassuring and helpful.

~ anonymous September 7, 2015
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