Planning With a Special Needs Trust Attorney in Boston
When you care for someone who has special needs, it can be hard to know how to protect your loved one’s future. One of the options you have is to create a special needs trust. These trusts ensure that your loved one receives coverage for basic needs throughout their lifetime without losing their eligibility for government benefits.
At Jillise McDonough Estate Planning Law Firm, a special needs trust attorney on our team can help you understand all the options that could help care for your loved one physically, financially, and legally. With the right legal professionals on your side, you can have greater peace of mind regarding your family’s future.
Understanding Special Needs Trusts
Your Boston special needs trust lawyer can help you understand exactly what this type of trust is. But in essence, a special needs trust is a legal arrangement that allows people with disabilities to receive financial support without jeopardizing their eligibility for government programs such as Medicaid or Supplemental Security Income (SSI). Special needs trusts can help enhance your loved one’s quality of life by ensuring that they have funds for comfort and care even after you’ve passed away.
These types of trusts are designed to help people with mental or physical disabilities, along with those who have chronic illnesses. The beneficiary must meet the Social Security Administration’s definition of “disability”. To qualify for a special needs trust, the person must have assets (or must expect to receive them). These assets need to exceed the limit for public benefits. For SSI, for example, the limit is typically $2,000.
There are also age limits for certain types of first-party special needs trusts, although there aren’t age limits for third-party trusts.
A special needs trust attorney in Boston can help you understand the various services and strategies that could help your loved one in the future.
Types of Special Needs Trusts
Special needs trust law in Boston gives you the opportunity to choose between a few types of trusts:
First-Party Special Needs Trusts
A first-party special needs trust is an irrevocable trust funded with money from the beneficiary. In some cases, this money comes from a personal injury settlement or an inheritance. A first-party special needs trust is required to have a provision to repay Medicaid, which is triggered upon the beneficiary’s death.
The goal of this type of trust is to protect the person’s eligibility for government benefits when they suddenly come into money, including inheritances. The trust allows an individual to avoid spending down their assets to remain eligible for benefits.
To be able to set up this type of trust, the beneficiary must be under 65 years old at the time it’s created. Upon their death, the state has to be reimbursed for the Medicaid benefits paid out throughout the person’s lifetime. For some families, this could cause concern, as the assets used for this Medicaid payback would not be able to be distributed to any remaining beneficiaries.
Funds must only be used for the sole benefit of the disabled individual. They must address supplemental needs that are not covered by public benefits. Supplemental needs can include entertainment, specialized equipment, education, and therapies.
For people over the age of 65, there is another type of first-party special needs trust that they can turn to, known as “pooled special needs trusts.” These trusts help individuals over 65 spend down their assets to ensure they can maintain their government benefits.
A non-profit organization administers the pooled trust during the person’s lifetime, distributing funds to third parties to pay for the beneficiary’s expenses. When the person dies, the organization keeps the remaining funds.
Third-Party Special Needs Trusts
Your special needs trust attorney can also help you set up a third-party trust. This trust is funded by someone other than the beneficiary, like the beneficiary’s parents.
A Boston third-party special needs trust lawyer from our firm can offer insight into whether this is the right choice for your situation.
Third-party trusts can be set up via a last will and testament or as their own trusts. They can also be funded using a will, a revocable trust, beneficiary designations, or lifetime gifts.
While the beneficiary lives, the trust can fund everything that the person needs. The trustee must be cautious when making distributions from the fund, however, to avoid jeopardizing government benefits eligibility. This ability to control the funding is one of the most important benefits of third-party trusts. It allows a trustee to accommodate the beneficiary’s changing needs over time.
Vitally, this type of trust does not require a Medicaid payback provision. Upon the person’s death, the funds can be passed to another beneficiary.
Legal Compliance and Trustee Guidance
A special needs trust is generally managed by a trustee. The trustee is appointed to manage assets and distribute funds as needed. Trustees must ensure that the funds go toward the beneficiary’s supplemental needs, rather than being spent on basic needs that government benefits already address.
Additionally, these trusts must comply with state and federal laws. This is something that a special needs trust attorney from our team can help you with.
Trustees need to act as fiduciaries and maintain detailed records of all expenses. Special needs trust violations can make it very difficult for the beneficiary to remain eligible for Social Security and a variety of other programs.
The Challenges of Being the Trustee of a Special Needs Trust
The trustee is a fiduciary, which means they cannot engage in “self-dealing” and they cannot combine their personal assets with those of the trust. Investing any assets from the trust into a company that they or close friends or family members own is also illegal. Trustees cannot sell assets from the trust to themselves or borrow from the trust.
The trustee is allowed, however, to hire accountants, financial advisors, and lawyers to help manage the trust. They can pay for these services using assets from the trust.
The trustee has the responsibility to obtain a federal tax identification number for the trust and file annual income taxes. They must maintain accurate and clear records of all expenses and deposits.
When the trust is part of a guardianship or another type of court proceeding, the trustee may have to file annual reports with the court. These are complex reports that provide an overview of everything that the trust was used for in the previous year.
Additionally, the trustee must comply with the provisions set forth by the Prudent Investor Act. This requires that the trust’s portfolio is diversified across asset classes. Instead of investing solely in real estate, for example, the trustee would need to ensure that investments covered a mix of assets, such as treasuries, gold, bonds, and other options.
For first-party special needs trusts, if the beneficiary is a Medicaid recipient, there are additional tasks that the trustee must perform. For example, they will have to notify the right Social Services District about the creation of the trust.
When the trust assets total more than $1 million, the trustee will also have to show proof that the beneficiary has been bonded (unless the court has waived that requirement).
Finally, when the beneficiary dies, the trustee must promptly inform the Social Services District of their death.
Benefits Trustees Must Be Aware Of
There are many benefit options that a trustee must be aware of and understand to ensure that the beneficiary can maintain their eligibility for programs. For example, Social Security Disability Insurance (SSDI) is one of these programs. SSDI is available to people with qualified disabilities who have worked and paid into the Social Security system.
Someone who has received SSDI for at least two years can apply for Medicare, regardless of their age.
Trustees also need to know about Supplemental Security Income, a program that the trust’s beneficiary could be eligible for if they are blind, disabled, 65 or older, and/or have little to no savings or income.
Understanding eligibility requirements for Medicaid is also essential. The beneficiary’s income and resources will be carefully assessed to ensure that they don’t exceed the required threshold.
In some instances, a trustee may also need to understand whether the beneficiary could be eligible for programs like the Supplemental Nutritional Assistance Program (SNAP).
Integrating Trusts With Estate Planning and Benefits
When you work with Jillise McDonough Estate Planning Law Firm, an attorney for special needs trusts can offer guidance about how to integrate trusts with the rest of your estate planning strategies. For example, rather than leaving a direct inheritance, you may be advised to set up revocable living trusts. You should never leave assets directly to the beneficiary because that can impact whether they preserve eligibility for the benefits they receive.
An attorney may recommend setting up an ABLE account. ABLE stands for “Achieving a Better Life Experience” and refers to a savings account for people living with disabilities that offers additional tax advantages. These accounts allow them to save for qualified expenses without putting their government benefits at risk. An ABLE account lets a person save up to $100,000 without impacting Social Security.
The person who holds the account must have a disability that began before the age of 46. The funds in ABLE accounts can be used for housing, education, transportation, employment training, and assistive technology.
Work With Jillise McDonough Law Firm
If you have a loved one with disabilities, taking the time to plan ahead for their well-being is vital. Our special needs trust law firm in Boston can help you determine what the best options might be for your family. Contact us to schedule a consultation today.
Frequently Asked Questions
Why Do Families Need a Special Needs Trust in Massachusetts?
A special needs trust lawyer in Boston will typically recommend special needs trusts when you want to ensure that a loved one with disabilities can receive vital funds throughout their lifetime and supplement their government benefits.
How Does a Special Needs Trust Protect SSI and MassHealth Benefits?
A special needs trust holds assets for a beneficiary who has disabilities. Many government programs, including SSI and MassHealth, have very strict income eligibility requirements. Your MassHealth eligibility trust attorney in Boston can help protect your loved one’s ability to participate in essential government-funded programs.
Can a Special Needs Trust Attorney Help Choose a Trustee?
Yes, a Boston special needs estate planning lawyer can help your family choose a trustee, providing appropriate advice so you can make informed decisions about the management of your trust.
Do Special Needs Trusts Have to Comply With Federal and Massachusetts Law?
Yes, special needs trusts must comply with all applicable Massachusetts laws, as well as federal laws. Violations could lead to your loved one losing essential access to funds or their benefits.
What Happens if a Trust Is Not Drafted Correctly?
An incorrectly drafted trust can lead to the immediate loss of your loved one’s government benefits if their income surpasses the required low-income threshold. Because the possible consequences of a poorly drafted trust are severe, it’s critical to hire a special needs trust attorney in Boston, MA, to draft your trust documents.
How Does a Special Needs Trust Support Long‑Term Care?
This type of trust helps you plan ahead for your loved one’s future needs. The funds in the trust can help pay for medical treatments, long-term care, and other essential aspects of your loved one’s life. When drafted by an experienced attorney, special needs trusts can help you manage all of your loved one’s care requirements.
Should Special Needs Trust Planning Be Part of a Broader Estate Plan?
Yes, the trust you create should be a part of your broader estate plan, ensuring your assets are used in the way you’d like them to be upon your death.
Can a Special Needs Trust Be Updated?
First-party special needs trusts are harder to update than third-party ones, but it is possible to update them. Make sure to hire a first-party special needs trust attorney in Boston to help you through this process.
When Should Families Meet With a Special Needs Trust Attorney?
The moment that you decide to establish a trust, you should contact a Boston supplemental needs trust lawyer to assist you. It’s best if you take this step with us as soon as you realize your loved one will require special care.
What Expenses Can a Special Needs Trust Pay For?
A special needs trust can pay for entertainment and services that improve the beneficiary’s quality of life. This can include transportation, educational opportunities, and professional services.
