What can a grandparent do that wants to provide for a grandchild that has special needs?
Joe and Lisa Smith have a grandson, Jacob. Jacob is severely disabled from an accident. He will never be able to live independently. Presently, Jacob is twenty years old and his parents take care of him. Jacob's mother does not work outside the home because Jacob requires constant care. Joe and Lisa Smith are very concerned about the situation. At their deaths, they want to make sure that their assets are used to take care of their grandson.
What can they do?
The Smiths may choose to set up a Special Needs Trust. This type of trust is designed to provide for Jacob's needs without causing him to lose his Medicaid eligibility. This is very important because Jacob's medical expenses are significant. Jacob receives $710 in monthly benefits each month and food stamps; but, this is not enough to provide for everything Jacob needs.
The Smiths want to help; but, if Jacob inherits money from them, he will be disqualified from his benefits until all of the money is spent. This means the inheritance from them that could have been used to supplement Jacob's needs for many years will be eaten up very quickly on his medical bills and daily care.
To prevent such a harsh result, the Smiths decide to include a Special Needs Trust in their Wills.
When both Joe and Lisa are deceased, the Executor, pursuant to their Wills, will establish a trust for Jacob. The money can then be used by the Trustee to buy the things Jacob needs. The Trustee can also use the assets in the trust to make certain Jacob has the care he needs; including, hiring caregivers.
The Smiths could also set up this type of trust in their Living Trust; or, they could set up an independent Special Needs Trust for Jacob while they are alive. At this time, however, they do not have the liquid assets to set up a trust during their lifetime. Instead, they simply want to make sure Jacob gets the benefit of their assets at their deaths. Placing a Special Needs Trust in their Wills will give them the result they want while protecting Jacob from losing his benefits.
The Smiths' estate planning also has an additional benefit as it gives Jacob's parents peace of mind in knowing that Jacob will have assets for his care. Jacob's parents have been worrying about how they will fund their own retirement and care for Jacob.
Special needs trusts must have precise legal language to meet the federal and state requirements so that the assets do not cause the beneficiary to lose benefits. This is not the type of trust to attempt to prepare by piecing together documents you find on the internet. Anyone considering establishing a trust should consult with an attorney to determine if a trust is the best option for the particular situation and to make certain the trust is worded properly to achieve the desired result.
Editor’s Note: Melanie B. Bradford is an attorney located in Scottsboro, Alabama at 803 Garland Ferry Road at the intersection of Veterans Drive and Garland Ferry near The Daily Sentinel. Her phone number is 256-259-3301. The Alabama State Bar requires any communication that may be interpreted as an ad to state: “No representation is made about the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.”