Planning for a Loved One With Special Needs:

Shannon F. Ladner, J.D. – Principal Elville and Associates, P.C

Successful estate planning takes into account not only your personal preferences for who will inherit your wealth upon your death, but also the potential effects that inheritance may have on a beneficiary. The most common scenario in which this is significant is when an intended beneficiary has special needs.  In this scenario, a third-party supplemental needs trust may be required to protect the beneficiary as well as the inheritance.

A third-party supplemental needs trust is an estate planning tool utilized to provide financial support to individuals with special needs without disrupting their eligibility for needs-based government benefits such as Social Security Income and Medicaid. A “third-party” supplemental needs trust is funded with assets owned by someone other than the beneficiary, such as a parent, grandparent, or other family members. It allows family members and friends to leave an inheritance or gifts to a loved one with special needs without disrupting their eligibility for means-tested government benefits. Since the assets are held in this type of trust and managed by a trustee, they will not count as a resource for Social Security Income and Medicaid eligibility purposes.

One of the traditional objectives of a third-party supplemental needs trust is to enhance the quality of life and provide for the needs of an individual with special needs beyond what government benefits cover. The assets within the trust can be used to pay for the disabled individual’s supplemental needs, including personal care services, dental expenses, transportation, recreational activities, vacations, and many other needs and services that are not provided by public benefits.

           Furthermore, a third-party supplemental needs trust provides a level of asset protection and management that is not possible through a direct bequest.  By appointing an appropriate trustee to oversee the supplemental needs trust, you can ensure that the trust assets are being used appropriately and in the best interest of the disabled beneficiary. Trustees have a fiduciary duty to manage the trust prudently and in accordance with the trust agreement, which in turn gives the grantor peace of mind. One should carefully consider who will be named as trustee, selecting someone who is trustworthy, reliable, and capable of fulfilling their fiduciary duties.

           Additionally, a third-party supplemental needs trust allows for flexibility in customizing the trust terms to the specific needs and circumstances of the beneficiary. The trust agreement can specify how the funds should be utilized, provide instructions for the trustee, include a designated advisory team, allow the trustee the option of hiring a care manager, and include provisions for contingent beneficiaries in the event of the lifetime beneficiary’s death. This enables families to tailor the trust to meet their specific goals and intentions.

          A third-party supplemental needs trust is a valuable estate planning tool for families looking to properly plan and provide for loved ones with disabilities while preserving their eligibility for public benefits. By utilizing this type of planning structure, families can preserve eligibility for means-tested benefits, provide asset protection, ensure proper management of trust assets, and customize provisions to meet the specific needs of the disabled beneficiary. It’s important that you consult with an estate planning attorney who understands the intricacies of special needs planning and has the capability to draft a third-party supplemental needs trust that complies with state laws and regulations. With proper planning, education, and guidance from a knowledgeable estate planning attorney, you will be able to provide financial support and security for your loved one with special needs.

Shannon F. Ladner, J.D., is a Principal Attorney with Elville and Associates and is the Leader of the firm’s busy Estate Planning Department. She educates and counsels clients through the entire estate planning process – beginning with the initial consultation, followed by the design and implementation of their plans, as well as the necessary maintenance and updating of their planning as changes occur in the laws and their lives.   Shannon is a contributor and presenter for the firm’s Elville Webinar Series and has been named to the Maryland Rising Stars List by Super Lawyers in 2023, 2024, and 2025.  Shannon may be reached at shannon@elvilleassociates.com, or by phone at 443-393-7696 x148.

Tags: Special Needs
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