Who Needs a Special Needs Trust? Attorney Bob Fechtman Explains

Parents and family members of people with special needs know that there are a number of government programs available to help people with special needs. Medicaid, Supplemental Security Income, the Supplemental Nutrition Assistance Program (SNAP), and the subsidized housing program (Section 8) are all options that might be available to help a person with special needs. These programs are all needs based and have income limits that determine a person’s eligibility for help. A special needs trust can help a person with special needs by providing a source of income and assets that will not disqualify the person from receiving these benefits. Attorney Bob Fechtman explains special needs trusts in this report.

Fechtman says that a test to determine if someone is eligible for a special needs trust is to determine whether the person is eligible for Social Security. “If you’re eligible for any Social Security benefits, then under the federal law, you’re eligible to be the beneficiary of a special needs trust.” State laws might also require a look when determining eligibility to use a special needs trust.

In Fechtman’s practice, he says, he meets with a lot of parents and grandparents of kids with special needs, and the level of special needs can vary widely from child to child. Some children are almost completely dependent on others for support. Other children are very high functioning and will graduate from high school and probably get into the workforce. Determining the level of a child’s special needs will help a caregiver determine whether a special needs trust is a good solution.

Fechtman adds that, in Indiana, his home state, there is considerable flexibility in the use of these trusts, and that is very helpful with young parents and a young child. “We don’t really know how these kids [will] turn out and whether they’re going to be reliant on needs-based public benefits.” Parents can “hedge their bets” by establishing special needs trusts and adapting the trusts so that trustees have discretion in how they spend the money for the beneficiary.

As to the mechanics of the trust, Fechtman uses the example of a five-year-old for whom a trust is established. He points out that the trust might not be fully funded until both parents are deceased, perhaps thirty or forty years down the road. “It’s hard to say what public benefits that individual might need at that time” and what the individual’s working or living situation might be. Fechtman drafts special needs trusts so as to keep the beneficiaries eligible down the road by changing the way the money is spent. SSI benefits in particular get some attention because of reductions in benefits based on support provided to a beneficiary from a trust. Fechtman gives the trustee the discretion to consider the possible loss of benefits because of support payments, the age and life expectancy of the beneficiary, and how much money is in the trust. Considering these things will help the trustee determine the value of qualifying for the SSI payments for the beneficiary.

Robert W. Fechtman is the founding partner of the Fechtman Law Office in Indianapolis, IN. He focuses his practice on the problems of older persons and those with disabilities, particularly special needs trusts, estate planning and trusts, health law, Medicaid planning, guardianships and decedents’ estates. He has been certified as an elder law attorney by the National Elder Law Foundation. He is the incoming vice-president of the Special Needs Alliance, a national network of lawyers dedicated to disability and public benefits law. He is a member of the National Academy of Elder Law Attorneys, and he is the President of the Indiana Chapter of the National Academy of Elder Law Attorneys. The Legal Broadcast Network is a featured network of Sequence Media Group.