This is the final installment of our III part blog series discussing Special Needs Trusts.

Before implementing a SNT, you should consider whether the trust is necessary. A SNT is not always necessary or the right answer. The cost of establishing and funding a “typical” SNT frequently ranges from $5,000 to $10,000 or more depending on the type of SNT established and whether or not there is Court involvement. Thereafter, the trust will incur administration expenses, including Trustee’s fees, administration fees, investment fees, and tax return preparation fees. These costs may be disproportionate in relation to the amount in value in question. These set-up and administration costs may be unnecessary if the beneficiary does not currently receive governmental benefits and is not anticipated to need SSI, Medicaid or public housing in the future.

A few alternatives to the establishment of Self-Settled SNT are compiled in the following paragraphs. An individual may purchase exempt resources, such as motor vehicle or home, pay off debt, including mortgages and credit card debt, prepay bills, purchase a pre-need funeral plan or give up needs- based benefits and rely on the individual’s resources, income and non-needs-based benefits. While giving up needs-based governmental benefits is generally not a good solution, if the amount of funds available to the beneficiary is relatively small, it might make better financial sense to spend down the funds on items that the beneficiary currently needs, rather than incur the expense of establishing a trust.

If a third-party SNT is being considered, there are fewer options available to ensure that the needs of the beneficiary are met. One alternative is disinheritance. This strategy was frequently used prior to the advent of SNTs however, it is not commonly used today. Another alternative is to make a gift to a third party under a moral obligation to assist the person with a disability. This strategy is not recommended since it leaves the disabled person at risk.

A tool that can be used in lieu of either a self-settled or third-party SNT is an ABLE account. ABLE (Achieving a Better Life Experience) Accounts allow an individual and her family to set aside up to $15,000 per year (in 2019). Unlike a special needs trust, an ABLE account can be used directly by the beneficiary. In order to be eligible to use an ABLE account, a beneficiary must be disabled within Social Security standards and must have become disabled prior to age 26.

If you would like to learn more about Special Needs Trusts, contact Weldy Law, PLLC, for a free initial consultation.

This blog is for informational purposes and does not provide legal counsel nor does it establish an attorney-client relationship.