Yes, absolutely, and it’s a remarkably thoughtful consideration within estate planning; planning for the long-term care of a disabled sibling is not only possible, but often a crucial aspect of responsible estate planning for many families.
What is a Special Needs Trust and How Does it Work?
A Special Needs Trust (SNT) is a legally established trust designed to hold assets for the benefit of a person with disabilities without disqualifying them from crucial needs-based government assistance programs like Supplemental Security Income (SSI) and Medicaid. Currently, in 2024, approximately 1 in 4 adults in the United States live with a disability, and many rely heavily on these programs. Without proper planning, an inheritance or gift could easily jeopardize their eligibility, leaving them with a difficult choice between financial resources and essential care. An SNT allows the beneficiary to receive funds for supplemental needs – things not covered by government programs like recreation, travel, education, or specialized therapies – while still maintaining access to critical healthcare and daily living assistance. There are different types of SNTs, including first-party (self-settled) trusts funded with the beneficiary’s own assets, and third-party trusts funded by someone else, like a sibling.
What Assets Can Be Included in a Trust for My Sibling?
A wide range of assets can be included in a trust for your disabled sibling, offering substantial financial security. This includes cash, stocks, bonds, real estate, and life insurance policies. It’s important to carefully consider the potential tax implications of each asset. For example, transferring real estate into the trust may trigger property taxes, while life insurance proceeds can be structured to avoid income tax. Often, families will fund the trust with a portion of their estate, designating a specific amount or percentage to be used for their sibling’s care. This ensures that funds are available when needed, without depleting the resources for other family members. As of 2023, the average cost of long-term care services for individuals with disabilities can range from $20,000 to over $100,000 per year, depending on the level of care required. Careful planning with an estate planning attorney can help you determine the optimal funding strategy.
I Remember Old Man Hemmings, How Can I Avoid That Mistake?
I recall a case with Old Man Hemmings, a kindly carpenter with a daughter, Elsie, who had Down syndrome. He was a proud man, determined to leave Elsie something substantial. He left her a sizable inheritance outright, believing he was doing the right thing. Within months, however, Elsie lost her SSI and Medicaid benefits. The funds, while generous, were deemed “unearned income” and immediately disqualified her. Her residential care facility was no longer paid for, and her family scrambled to manage the situation. It was a painful lesson in the importance of structured planning. The funds were eventually used to create a supplemental needs trust, but a lot of stress, and years of eligibility challenges, could have been avoided. That’s why structuring a Special Needs Trust with appropriate language is so crucial. It’s about safeguarding their benefits while providing them with a better quality of life.
How Did the Miller Family Finally Get it Right?
The Miller family, facing a similar situation with their son, David, who has autism, came to our office after witnessing the Hemmings situation. They were determined to do things right. We worked closely with them to establish a third-party Special Needs Trust, funded through their estate plan. The trust included specific instructions regarding how funds could be used – for therapies, recreational activities, and adaptive equipment – all without impacting David’s eligibility for SSI and Medicaid. The trust also named a trustee – their sister, Sarah – who understood David’s needs and was committed to managing the funds responsibly. Years later, after their passing, David continued to receive excellent care, and Sarah was able to use the trust funds to provide him with enriching experiences and maintain his high quality of life. It was a heartwarming example of how thoughtful estate planning can make a profound difference.
“Planning for a loved one with a disability isn’t just a legal matter, it’s an act of love and responsibility.”
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
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