Setting up a special needs trust (SNT) for a person with a disability or special needs named as the beneficiary may be an important step to preserving your loved one’s government benefit eligibility. To get started, follow these steps:
- Contact a financial planner who is experienced in planning for special needs.
- Take inventory of your assets, including future inheritances your loved one might receive, property sales he or she may benefit from, or income that might be earned.
- Capture specific goals for your loved one by creating a Letter of Intent (LOI). An LOI gives you a big picture of your loved ones’ future care needs – for example the cost of housing, food and other expenses -- and helps create a vision for their future.
- Calculate how much funding you will need for your loved ones’ SNT by balancing the needs of the present and the future -- daily life, retirement savings, travel, college and life goals. Factor in taxes, inflation and administrative costs. Err on the conservative side, and round up.
- Enter a collaborative process as your financial advisor calculates numbers based on your and your loved ones’ goals and available assets. Confirm what’s realistic and comfortable for your family. As you go through the process, you’ll be able to fill in any gaps with life insurance benefits, potential earned income from your loved one and other funds.
- Meet with a qualified special needs attorney to draft the documents. Be sure to find a special needs attorney with specific experience planning for those with disabilities.
- Select a trustee or trustees to be responsible for filing the trust taxes, administrating the trust, and understanding what’s allowable for trust distributions, according to its documents. Often parents will name themselves as trustees, but they’ll still need to decide who will manage the trust, once they pass away, so the decision on successor trustees is critical. Name successor trustees from multiple generations to make sure the role is filled for the long term. While many people automatically appoint other family members as successor trustees, family dynamics may sometimes get in the way of clear financial decision-making. In many cases, a professional trust administrator is a good alternative.
- Consider assigning co-trustees [optional]. You, a family member and a professional trustee can be co-trustees of the SNT. For a fee, the professional can be sure all actions are compliant with the law and send out distributions, while the family member can look out for the best interest of your loved one. A trust protector – someone appointed to watch over a trust over time to ensure that it is not adversely affected by any changes in the law or circumstances -- could also be added, to oversee all the work.
- Create an informal committee [optional]. The people who can be involved on your SNT committee include the trust protector, the trustee or co-trustees, your loved one’s doctor, your special needs attorney, other family members, the person who has power of attorney, your loved one and yourself. Each committee member will know the beneficiary well and will be able to guide the trustees in decision making that is in the best interest of your loved one with a disability or special needs.
- Make the SNT a beneficiary. Once the SNT is legally in place, simply add it to your financial assets that have your loved one with a disability or special need named as a beneficiary, such as life insurance and pension plans.
- Talk to a financial advisor to get started
- Create a Letter of Intent (LOI)
- Find a special needs attorney
- Appoint trustees, co-trustees and successors to the SNT
Beneficiaries with Disabilities – What You Need to Know
Types of Special Needs Trusts (SNTs)
How to Talk to My Family About Our Special Needs Trust (SNT)
Questions to Ask My Special Needs Trust (SNT) Attorney
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