Right now, you and your loved ones might be healthy and capable. But imagine how peaceful you would feel knowing you've planned for the unexpected. Planning isn't just about facing life today; it's about creating a buffer for whatever lies ahead, especially in case of a disability. 

Contingency planning through special needs trusts ensures you protect yourself and those you love no matter what happens.

How Special Needs Trusts Offer Long-Term Protection

A special needs trust or supplemental needs trust (SNT) helps people with disabilities remain eligible to receive government benefits like Medicaid and Supplemental Security Income (SSI). They're often created in case the person with special needs will receive an inheritance or compensation like a legal settlement.

Common types of special needs trusts include:

• Third-Party Special Needs Trusts: One person creates this trust to benefit someone else. A parent might set one up to protect assets for a child, a spouse for their partner, or a grandparent for a grandchild. 
• First-Party Supplemental Needs Trusts: A mentally competent person with a disability can create one to protect their assets and stay eligible for public assistance while they're under age 65. A parent, grandparent, legal guardian or a court may also set one up for someone with a disability. The trust must be formed only from the primary beneficiary's assets and include a provision to pay back Medicaid/MaineCare after their death. The beneficiary must also meet the federal government’s definition of disability. (With a third-party SNT, the trust creator dictates how their assets will be handled after they die; the Medicaid payback provision is unnecessary.)
• Contingent Special Needs Trusts: These trusts protect disabled beneficiaries' benefits when they receive an inheritance. They're usually considered third-party trusts and often defined in a will or revocable living trust to apply only if the beneficiary becomes disabled and is receiving benefits when they inherit. 

Unless the creator will leave their assets only to charity, to prevent financial crises for people with disabilities, it's important to add certain wording or provisions to a will or revocable living trust. This simple step helps secure their future.

Let's look at a few potential scenarios where doing this might be beneficial:

• A spouse with disabilities: Rather than leaving everything directly to them in a will, a special needs trust can hold the assets for their benefit. After their death, the trust terminates, and the assets pass to any children or other beneficiaries.
• A child with special needs: Before they inherit, a special needs trust can be formed to preserve their public benefits.

What Could Happen Without Contingency Planning

Our futures are undetermined and life can change quickly. These are some possibilities to consider in your planning:

• Unexpected disabilities: Health issues don't only affect older people. Situations that could lead to the need for a special needs trust include accidents and illnesses.
• Aging children: Sometimes children live long enough to face their own aging issues, especially if a parent lives to an advanced age. A contingent special needs trust protects an inheritance for an adult child with disabilities, ensuring the funds benefit them rather than going to other people or entities like a nursing home.

If one of your beneficiaries has a disability, given the complexities involved, consider consulting an attorney about creating a special needs trust.

To discuss contingent special needs planning to protect your loved ones, contact us online or call (207) 377-6966.