People with special needs enrich our lives in so many ways. While not every client of our firm has a family member with special needs, those that do understand how important these individuals are and why they need to be protected. Whether a family member has a disability that prevents him or her from interacting at all, or if the beneficiary suffers from mild autism, or a physical handicap, a carefully crafted estate plan is essential to their protection.
Mo Able Account
The first, and most recent, addition to our repertoire of tools that can be used to plan for a special needs beneficiary is a MO Able account. Depending upon the amount of assets available, your family situation, and the beneficiary’s unique needs, a MO Able Account may be the easiest way to plan for his or her care in the future.
A Missouri Able Account is a quasi-investment account for MO residents with disabilities which provides tax-free savings and investments without jeopardizing federal needs-based benefits like SSI or Medicaid. Money can be withdrawn from this account via a debit card or other means to pay for qualified expenses (housing, food, transportation, education, assistive technology, health care, etc), either by a guardian or even by the beneficiary themselves if he or she is able.
Mo Able accounts are free to set up and have an extremely low monthly cost to maintain. However, they have certain limitations and restrictions which may not be suitable for your goals or your special needs beneficiary’s situation. For example, the maximum contribution (other than the beneficiary’s own employment income) is limited to $15,000 per year.
Special Needs Trust
A special needs trust is a traditional form of trust set up to specifically and exclusively provide for a beneficiary with special needs. It has none of the restrictions and limitations of a Mo Able account, but does not receive special tax treatment. If the special needs beneficiary is on a federal needs-based program like Medicaid or SSI, the special needs trust works to enhance the beneficiary’s quality of life by providing additional funds for things which the program does not cover, such as vacations, money for holiday gifts, electronics, etc. If the beneficiary is not on a needs-based program, the special needs trust provides for all facets of the beneficiary’s care, from housing to food to vacations and cell phones.
A special needs trust does have a fee to set up, but provides the best protection for a special needs beneficiary and is the most tailored to their situation. Perhaps the beneficiary has the capacity to make minor purchases like going out for ice cream, but cannot otherwise manage his or her finances. In this situation, we could authorize a weekly or monthly “allowance” for the person to use for pleasure and entertainment, but have the rest of the money managed by a responsible Trustee. A special needs trust can be customized in this way.
Revocable Trust with Special Needs Article
A third option to provide for a special needs beneficiary is a traditional family trust. This is different from a special needs trust in that they typically provide for multiple beneficiaries upon the death of the grantor(s), one of which has or may acquire special needs. A typical family trust is funded upon the death of the grantors, and has general framework for special needs beneficiaries in a special needs subtrust article. A special needs trust, on the other hand, is for a specific individual, is highly tailored to his or her needs, is funded during the grantor’s lifetimes or from a legal settlement, not just upon the grantor’s death.
For example, a traditional couple would set up a family trust to leave an equal amount of their assets to each of their children, and typically includes a special needs article for any children who are unable to manage that money. When the parents pass, the successor trustee (like a son or daughter) distributes the money outright to all the siblings but the special needs one. The Successor Trustee instead holds on to his or her share and uses it for the special needs sibling’s benefit.
A special needs subtrust article is typically included in any quality family trust document. It lacks much of the customization that a special needs trust has, but at least provides for some general protections for the special needs beneficiary.