If you have family members or close friends that have disabilities, it’s important to inform yourself about estate planning strategies that can help your loved ones after you pass away.
This article discusses some ideas you can use to best prepare for these important people in your Virginia estate plan, and will generally focus on the utility of a special needs trust in such situations.
However, this is far from a comprehensive article.
Especially in complicated situations such as these, it’s always recommended that you speak with an estate planning attorney before taking any permanent actions.
Creating A Special Needs Trust
If you want to provide for someone who has critical physical or mental impediments in your estate plan, you should consider setting up a Virginia Special Needs Trust.
Though we’ll go more in depth later on, you should know that the trust can be used for clothing, entertainment, medical care bills, etc.
The person the trust is being made for is called the beneficiary, while the person establishing the trust is called the grantor.
Virginia Special Needs Trust: How It Works
While you can do some estate planning tasks on your own, we encourage you to seek out an attorney to provide for a loved-one with a disability or other special need.
When setting up the trust, it’s often wise to hire an estate planning attorney so that you can make sure the document is best suited for your situation.
Once you seek legal counsel, you can proceed to setting the terms of the trust document and naming each person involved.
Select a Trustee
The first rule of business when establishing a trust for people with special needs is to make sure you, as a grantor, choose a reliable trustee.
In this role, a trustee will have control over the trust’s assets, should be aware of the beneficiary’s needs, and will do what’s needed to make sure the trust’s beneficiary is taken care of in the best way possible.
Because of this, the trustee and the beneficiary will have to have somewhat of a close working relationship to ensure that all things are being handled correctly.
For this reason, communication between both parties will be essential.
Your trustee may also have to work with doctors, banks, and even lawyers.
Make sure you choose someone that is not only responsible, but also knowledgeable enough about their role as a trustee.
It’s important to note that your beneficiary and trustee should not be the same person.
This is important because, in order for a beneficiary to be eligible for public benefit programs such as Medicaid and Public Housing, they must not own or be primarily in charge of the assets in the trust.
For survivorship purposes, you should also enlist a successor trustee in the trust as well.
Choose a Guardian
When preparing for people with disabilities or special needs, it’s important to recognize that in many situations they’ll need personal care.
That’s why it’s common for special needs trusts to assign a guardian to the trust’s beneficiary.
In this role, a guardian reports to the trustee what exactly the beneficiary needs in terms of care and medical and living expenses.
3 Types of Special Needs Trusts
There are three main types of special needs trusts, and each type carries various pros and cons.
It’s wise to speak with an attorney to determine what kind of trust will work best for you in your situation.
First Party Trust
A First Party Trust is a type of special needs trust in which the beneficiary uses their own property and assets to set up the trust.
This type of trust is most common in circumstances where one is ineligible for public benefit programs.
If you would like to choose this option and also preserve your eligibility for those programs, you make sure to meet certain requirements. For example:
- The Special Needs case must meet the Social Security Administration’s standards.
- The trust must include a Medicaid payback clause.
- The trust must be for personal use only.
- The beneficiary is younger than 65.
Third Party Trust
A Third Party Trust is a Special Needs trust where a person other than the beneficiary provides the assets and property for the trust.
For example, if you’re a parent and would like to create this type of fund for your son, you would be the trust’s guarantor.
As with a First Party Trust, you must make sure the trust’s beneficiary is younger than 65 and meet the SSA’s standards.
Finally, a Pooled Trust, also known as a community trust, is a special needs trust that is created by an institution such as a non-profit organization.
Moreover, the non-profit would serve as trustee and manage the distribution of funds towards the care of the trust’s beneficiary.
What Exactly Can I Use A Special Needs Trust For?
Now that you’ve looked at the different types of Special Needs trusts, you should be aware of what you actually use these trusts for.
Below is a list of things you can use a Special Needs trust for at the trustee’s approval:
- Personal/Companion Care
- Medical Equipment
- Dental Care
- Rehabilitation and Therapy
Basically, the trust can be used for anything that improves the life of the individual with special needs, provided that the trustee signs off on the expense.
Hopefully this guide gave you information you need as you make plans for your disabled loved one.
Because Virginia trusts require very specific wording and instruction, it’s important to hire an estate planning attorney to help you complete this important step in your Virginia estate plan.