Creating a special needs trust can be a powerful way to protect the assets of children who secure settlements in personal injury lawsuits, but still need to receive means-tested government benefits. At bottom, a trust is simply a legal arrangement, established by drafting and signing a legal document. You can even find sample trust documents online.

Use Caution With Special Needs Trust Forms

It might be tempting, faced by the wealth of information available on the web, to draft a trust agreement without seeking an expert’s help. Most experienced settlement planners, however, would discourage families from attempting to establish a trust on their own.

Here’s why.

Opportunities & Obligations

Like all legal agreements, special needs trusts are binding documents, creating both opportunities and obligations. Requirements of federal and state law must be observed to preserve a child’s eligibility for government benefits. Often, a working knowledge of the Social Security Administration and Centers for Medicare and Medicaid is beneficial.

Father Playing With Child

More fundamentally, an accurate picture of your child’s needs, both now and in the future, should be developed to ensure that the trust is written with the flexibility needed to protect their interests for years to come. In short, seeking the help of an experienced professional is almost always a better option than going it alone.

Court-Ordered Trusts

In many cases, drafting a child’s trust without legal assistance isn’t even possible. Settlements in civil lawsuits, for example, require court approval. When these lawsuits involve minors, as in the case of most birth injury claims, it’s customary for the court to also establish a special needs trust for the child plaintiff. In some instances, the court will simply order a trust to be created, leaving the particulars up to parents, grandparents or a legal guardian. Of course, the resulting document will still need to pass muster before the court, which would be a tall order without the help of an experienced professional.

Pooled Trusts

Many special needs trusts, however, do not take the court-ordered route. Pooled trusts, for example, can be a wonderful option for children who have secured relatively-small sums of money and still need government benefits to live healthy lives.

Administered and managed by non-profit organizations, pooled trusts take money from multiple people with disabilities and “pool” these assets together for investment purposes. Individual members of the trust maintain personal accounts, which can be funded using money from settlements or inheritances (in the case of first-party pooled trusts) or a loved one’s own assets (in the case of third-party pooled trusts).

Joinder Agreements

Alongside their other benefits, pooled trusts remove the confusion of drafting an individual special needs trust and ask parents to complete a standardized joinder agreement. Here’s an example, prepared by the Commonwealth Community Trust, a national pooled special needs trust. To complete a joinder agreement, families don’t really need any specialized legal knowledge. Just answer some simple questions, fill in your personal information and you’ve created a trust. But discussing your options with a professional is still a good idea.

How do you know that a pooled trust is the best option? Pooled trusts aren’t without their disadvantages. In fact, some pooled trusts turn out to be more expensive than other forms of special needs trust. They also tend to be inflexible, granting distributions only on a predetermined schedule that might not match a beneficiary’s actual needs.

Even if a pooled trust is the best option, how do you know you’ve selected the best non-profit to work with? Will your joinder agreement allow for third-party contributions in the future? What will happen to your child’s remaining assets after their death?

These questions should all be answered with confidence before any legal documents are signed. We believe that consulting with a professional is the best way to answer them.

Legal Requirements & Compliance

The vast majority of families would be best-served by contacting an attorney or settlement planner, someone with extensive experience in drafting special needs trusts, to ensure that every requirement of state and federal law is met.

Trust arrangements must be written in technical language with a great deal of nuance. Most of this language is absolutely mandatory, per local and national statutes. Special needs trusts are no different, particularly so-called first-party trusts, in which the beneficiary’s own assets (like an inheritance or legal settlement) are used to fund the trust.

These sort of trust agreements are extremely complicated. In most cases, the expertise of a legal professional will be required, simply to remain in compliance with state and federal statute for the lifetime of the trust.

Practical Flexibility

Legal help is important for another reason, too. Special needs trusts are powerful precisely because their language, along with the stipulations embodied by that language, can be tailored to meet the needs of a unique child or adult with disabilities.

Trusts can be given a lot of nuance, instructing trustees to act in specific ways, taking the actual needs of the beneficiary into account and even changing over time. All these nuances, however, can impact how government agencies, like the Social Security Administration, view the trust.

Without sufficient care, an inexpertly-drafted special needs trust can misfire, undermining the beneficiary’s eligibility for government benefit programs. Avoiding mistakes like that is a main reason why most families seek out legal assistance before establishing a trust for their loved one.

Predicting Future Needs

Another benefit? Experienced settlement planners can help families understand how their child’s needs and desires might evolve in the future, allowing the trust document to embody potential developments and nimbly adapt to changing circumstances.

The potential for nuance and variation in a special needs trust also highlights the main problem with pre-drafted special needs trust forms. While these cookie-cutter documents are likely to preserve the basic benefit of an SNT (allowing a child to benefit, in some way, from the assets while protecting public assistance), there’s no way that a downloadable form could be customized to address the unique needs of your child. And, without an expert’s assistance, altering the form’s standardized language could lead to disastrous consequences in the long run.

So when should you contact a professional settlement planner to start mapping out your child’s future? As soon as possible. While many families assume that settlement planning only comes in handy after the end of litigation, it’s best practice to gain an expert’s insight well before that time.

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