Imagine being the parent of a child living with a significant disability. Your daily life is filled with navigating therapies, medical appointments, and education plans – all while quietly worrying about the future.
For many parents across Washington State, the future is a real concern.
What happens when you’re no longer around to provide care? How can you ensure financial support? Who is going to advocate for your child as they age?
You want to leave your child the resources they need to live a full, secure life – but you also know that even a modest inheritance could unintentionally disqualify them from essential government benefits. In other cases, there may be concerns about the risk of others taking advantage of your child or gaining access to assets intended to support them throughout their lifetime.
This is the difficult crossroads many families face, here in Washington as well as around the Pacific Northwest and the country.
Fortunately, a Third Party Special Needs Trusts (TSNT) can offer a thoughtful, strategic solution. These specialized trusts can provide long-term financial support while preserving eligibility for critical public programs. TSNTs may also provide “guardrails” around the assets to protect your loved one from undue influence and, at times, themselves. For families planning ahead, TSNTs play a vital role in securing a loved one’s future.
The Benefits Preservation Challenge
Many individuals living with disabilities rely on means-tested government benefits like Supplemental Security Income (SSI) and Medicaid. Medicaid can provide comprehensive healthcare and care giving services. But eligibility for these programs can be impacted by an individual’s income and resources.
The financial restrictions for means-tested benefits programs can create a planning challenge for families, especially those families that have accumulated wealth. Leaving assets directly to a loved one living with special needs, through a will, life insurance policy, or direct financial gift, could unintentionally trigger disqualification from benefits.
Unfortunately, conventional trusts may fall short in these situations. Without proper planning, a well-meaning inheritance may do more harm than good.
That’s where Third Party Special Needs Trusts come in.
How Third Party Special Needs Trusts Work
A Third Party Special Needs Trust is a legal arrangement designed to hold and manage assets for the benefit of a person living with a disability, without interfering with their eligibility for public benefits. It works by allowing funds to be used for “supplemental” or “quality of life” needs not covered by means-tested public benefits. Supplemental needs may include additional care giving, payment for service animals, therapies and medical equipment not covered by benefits, and recreational experiences.Third Party SNTs are typically funded by a parent or other family member. They are ideal for families planning proactively for a child’s future support.
Key structural elements of a Third Party Special Needs Trust may include:
- A trustee who manages the assets and ensures distributions are made in compliance with federal and state rules.
- A provision in the trust that gives the trustee full discretion over distributions.
- A provision in the trust that protects trust assets from creditors and prevents the beneficiary from assigning their interest in the trust.
A properly drafted TSNT ensures that funds are used to supplement the beneficiary’s means-tested benefits, preserving access to healthcare and income assistance.
Why Professional Guidance Matters
Setting up a Third Party Special Needs Trust requires guidance from attorneys skilled in drafting this specialized trust. The rules governing benefit eligibility and trust structure are complicated and often evolving. An experienced attorney can draft a trust tailored to the individual’s needs. In addition to having a well-drafted trust, it is important to appoint a trustee who can ensure proper administration over time. Professional trustees are often best-suited to be the trustees of Third Party Special Needs Trusts due to their experience in ensuring the trust terms are followed, assets are invested in accordance with the needs of the beneficiary, appropriate professionals such as case managers are engaged, and that complicated family dynamics are addressed.
In many cases, families opt to pair a Third Party Special Needs Trust with a Letter of Intent – a non-binding document that provides guidance on the beneficiary’s routines, preferences, medical history, and the family’s dreams and hopes for their child. This documentation helps the trustee, and other involved professionals, better understand the needs of the beneficiary and ensure distributions from the trust help the beneficiary live their most fulfilling life.
Planning with Compassion and Clarity
For parents and caregivers, the goal is simple: provide for your loved one in a way that ensures stability, dignity, and opportunity. A Third Party Special Needs Trusts offer a way to plan for the future and ensure a loved one is cared for over time.
By creating a TSNT, you’re not just setting money aside – you’re ensuring that your child has long-term support. The process of setting up a Third Party Special Needs Trust may feel daunting, but it’s one of the most impactful steps a family can take. With the right tools and guidance, you can create a more secure future for a loved one.