Special Needs Trusts
As trusts attorneys in Hawaii, we are frequently called upon to help parents with a special needs child. The main concern is how the child will be taken care of once the parents are gone.
Trust statutes allow parents to establish a trust fund that ensures long-term care of the child without loss of government benefits (Social Security Supplemental Security Income, food stamps and Medicaid). To qualify for those benefits, a disabled adult cannot have assets worth more than $2000 beyond owning a car and a home. The same eligibility requirements apply to coverage for medical expenses, mental health and nursing home care.
A supplemental needs trusts, established with the help of a trusts lawyer, sets aside assets that can still be used to enhance the life of the child. These assets can be used for such things as travel, preventive health (nutrition counseling and fitness training) and special needs camps.
Vulnerabilities of leaving assets to a relative instead of setting up a trust
Sometimes families choose to leave assets to another relative, usually a sibling, and that relative is given discretion on how to take care of the child. This is subject to a number of vulnerabilities that might not serve the best interests of the disabled individual:
- The relative receiving those funds will probably be taxed at a higher rate, particularly if the funds are received in a lump sum
- If that relative dies before the disabled individual, the assets may go to his or her heirs
- The relative will have discretion to use the funds for unrelated purposes
- A judgment against the relative, in criminal or civil proceedings (including a divorce or bankruptcy), can draw from those assets
If, however, a trust is established instead of a simple bequest of funds, a relative can still help to manage care. The trusted family member or friend (e.g., a special needs teacher or minister) can be selected as the trustee (as can a bank, for an administration fee). Or, a team of family members together with a financial planner can work together as a custodial committee. Your trust planning could also include a pooled account trust, which would distribute remaining assets after the death of the disabled individual, if any, to other disabled people.
As Hawaii trusts lawyers, we cultivate long-standing relationships with our clients, based on trust and open lines of communication. At the Law Offices of Reuben S.F. Wong, weekend appointments are available, and we provide services in Mandarin and Cantonese. We are located at 1164 Bishop Street, Suite 1006, Finance Factor Center, Honolulu HI 96813.
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