WHAT IS A SPECIAL NEEDS TRUST IN PENNSYLVANIA?

“There is no generic estate plan that is right for everyone because each family is different

and people have varying needs”

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Estate planning is not a one-size-fits-all, cookie-cutter affair. There is no generic

estate plan that is right for everyone, because each family is different, and people

have varying needs.

When you are choosing asset transfer vehicles you should consider your own

personal situation. For example, if the value of your estate exceeds $5.34 million,

you would have federal estate tax concerns.

People who are exposed to the estate tax must take steps to gain estate tax

efficiency. Estate planning tools that would be used by these individuals would

not necessarily be appropriate for people who are not faced with the prospect

paying the estate tax.

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In addition to your own personal situation, you should also consider the life

situation of everyone on your inheritance list. The right way to provide assets for

one person may not be optimal for the next.

With this in mind, we will look at the legal device called a special needs trust in

this paper.

PRESERVING BENEFIT ELIGIBILITY

If you have someone with a disability that you want to provide for in your estate

plan, you should consider the rules that govern benefit eligibility.

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People with disabilities are often enrolled in the Medicaid program. Medicaid is a

health insurance program, and it can be invaluable to many people with special

needs. Under some circumstances, care and treatment can cost millions of dollars

over the course of a lifetime.

This program is not available to people simply because they have special needs.

You must be able to prove

that you have very limited

financial resources, because

Medicaid is a need-based

program.

If your financial status

changes as a benefit

recipient, you could lose

eligibility for much-needed

Medicaid coverage.

Many people assume that they should use a last will as a vehicle of asset transfer.

The idea is that you split your resources up like pieces of a pie.

Let's say that you include a loved one with a disability in your last will. This

family member would receive a direct inheritance that would improve his or her

financial status considerably. As a result, ongoing eligibility for Medicaid could be

forfeited.

Another benefit that many people with disabilities rely upon is the Supplemental

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Security Income program. As the name would imply, this program provides an

ongoing source of income for people who can qualify.

SSI is also a need-based program, so eligibility could be lost if a benefit recipient

was to come into a windfall of money.

SPECIAL NEEDS TRUSTS

It is possible to provide assets for the benefit of someone with a disability without

jeopardizing government benefit eligibility. This is typically done through the

creation of a legal device called a special needs trust. These trusts are alternately

called supplemental needs trusts.

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You would make the loved one with a disability the beneficiary of the trust, and

you would name a trustee to administer the trust. Under government regulations,

the trustee could direct the actions of the trust and use the assets to take care of

the beneficiary's supplemental needs.

These would be needs that are not being satisfied by Medicaid and Supplemental

Security Income. As long as the trustee uses the assets appropriately given

program rules, the expenditures would not jeopardize benefit eligibility.

If you fund a special needs trust for the benefit of a loved one, it is called a third

party special needs trust. When this type of trust is in place, the Medicaid

program would not seek

reimbursement after the

beneficiary passes away.

There are also self-

settled or first party

special needs trusts.

These trusts are funded

with the beneficiary's

own resources. The

beneficiary could retain Medicaid coverage when this type of trust has been

created, but after the death of the beneficiary, Medicaid would seek

reimbursement from the beneficiary's estate.

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SUMMARY

A person with a disability could lose government benefit eligibility if this

individual was to receive a significant direct inheritance. To preserve government

benefit eligibility, you could create a special needs trust.

The assets in the trust could be used to improve the beneficiary's quality of life,

but benefit eligibility would not be jeopardized.

To learn more about special needs planning, schedule a consultation with a

licensed elder law attorney.

REFERENCES

American Bar Association http://www.americanbar.org/newsletter/publications/law_trends_news_practice_area_e_newsletter_home/0501_estate_financialplanning.html National Alliance on Mental Health http://www.nami.org/Content/NavigationMenu/Find_Support/Legal_Support/Special_Needs_Estate_Planning/Special_Needs_Trust_Primer.htm Nolo http://www.nolo.com/legal-encyclopedia/using-special-needs-trust-when-you-have-too-many-assets-medicaid.html

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About Flood & Masiuk, LLC Marianne Flood As the founder and managing partner of the Southampton, Pennsylvania law firm of Flood & Masiuk, LLC, Marianne Flood oversees a practice devoted to providing clients with personalized service and counsel in all aspects of estate planning. Because of Ms. Flood’s deep commitment to the specialty of estate planning, she became a member of the American Academy of Estate Planning Attorneys in April, 2000. Her entire private practice has been devoted to helping families of

all ages and backgrounds.

Joe Masiuk As a partner in the law firm of Flood & Masiuk, LLC, Joseph Masiuk is committed to, a practice which provides people of all ages and walks of life with thoughtful and comprehensive solutions in Estate Planning, which includes Elder Care, Medicaid and Special Needs Planning. Today, Mr. Masiuk is a widely noted speaker, author and seminar leader on topics ranging from estate and Medicaid planning to asset protection for traditional and GLBT couples and families. Flood & Masiuk, LLC 703 Lakeside Park Southampton, PA 18966 Phone: (215) 322-6330 Fax: (215) 322-9199 Website: www.floodmasiuk.com