Thomas J. Reilly
The Dignity Group
1163 East Ogden Avenue, Suite 705-354
Naperville, IL 60563
|Reprinted from the Workbook on the Special Needs and Services with Disabilities, 4th edition, with the permission of The Dignity Group|
The most useful tool available to provide future financial security for persons with disabilities is the trust.
A trust can be created by the parents, grandparents, or siblings of a person who is disabled. It is designed to control the distribution of property before or after the death of the creator of the trust and after the death of the individual for whose benefit the trust was created.
Trusts can be very flexible in meeting the needs of the individual, yet specific at the same time.
A properly drafted trust will provide additional opportunities for the individual with a disability without making them ineligible for government benefits or exposing the assets to collection by state agencies who have provided services to the individual.
Anyone can create a trust. Most often trusts for individuals with disabilities are created by a parent or other relative. The person who creates the trust decides who the trustee will be and sets guidelines by which the trust will be held and managed.
The Trust itself is a legal instrument that splits or separates responsibilities of ownership from the benefits of the asset. The trustee becomes the owner of the trust assets. The property in the trust is managed with primary attention on the benefit to the beneficiary.
|PARENTS OF A PERSON WITH A DISABILITY|
(creator of the trust)
|provider of the asset|
(individual or institution)
|control and management of the asset|
(person with a disability)
|benefit of assets|
The annual cost for providing care for a loved one with a disability can be anywhere from $30,000 to $150,000 depending on the needs of the individual.
Very few families have sufficient assets to provide total private care. Therefore, government entitlement programs become an essential part of the support system used by the majority of families.
In the development of a trust for a beneficiary with a disability it is very important to insure that the state and federal benefits the individual is receiving are not jeopardized. The Illinois Department of Mental Health and Developmental Disabilities has invaded trusts to reimburse itself for services previously rendered. To avoid this risk it is important that a trust is drafted very carefully to provide for the supplemental needs of an individual. In addition, care must be taken to insure that the federal government does not count the trust income and principal as an asset of an individual when determining the person's eligibility for entitlement benefits.
If assets exist in the name of the individual in excess of allowable limits, those assets may be viewed as the primary means of support with governmental funds being secondary. A trust must clearly indicate its purpose of supplementation, positioning government funds for primary care, comfort and support
Don't use standardized trust forms. They are not intended to provide protection for the special needs of an individual who is disabled.
You must be very careful and very specific. A trust which provides for the general well being of an individual may be considered to replace state and federal benefits rather than to supplement those benefits. Specific discussion within the trust of the purpose of the trust and limitation of the powers and duties of the trustee is very important.
i.e.: The purpose of this trust shall be to insure that the services provided to __________ will be of assistance to her in the development of her maximum potential, to only supplement and not to replace earnings and governmental benefits, if any, and not to pay for food, lodging, medical, dental and hospital expenses which can otherwise be claimed from other sources including governmental benefits. It is further intended to prevent the State or Federal Governments and/or any of its department or agencies from invading this trust.
Eligibility for government benefits will also be affected by cash which the individual receives. Therefore the trustee should not be permitted to give any substantial amount of cash directly to the beneficiary. Purchasing goods and services for the benefit of the beneficiary is the safer procedure. For example, the trustee should purchase the tickets for a trip, rather than give the beneficiary the cash to purchase the tickets.
The trustee should he permitted to use discretion in the management and expenditure of the principal and interest of the trust.
In the event of an emergency, the trustee should have the power to spend money from the trust principal.
The greater the control a beneficiary has over the use of trust assets the greater the possibility that those assets will be considered to belong to the beneficiary. Make sure that the trustee has total control over the trust. Do not allow the beneficiary to demand that distributions occur.
The trustee's role is very important and you must be very careful when making your choice of a trustee. The trustee may be a person or institution. Consider the ability of the trustee to manage the financial responsibilities of the trust assets. The ability of the trustee to understand and address the needs of the beneficiary with particular consideration of the disability is just as important. There are many factors to be considered in selecting a trustee. During this seminar we will discuss this decision.
The cash or cash like assets placed in the trust should be sufficient to cover the needs of the individual over and above the entitlement money without unnecessarily depleting your estate. To accomplish this balance a number of factors should be considered.
Many questions need to be considered. Be careful and, if possible, get expert advice.
The National Foundation for People with Disabilities has developed a Life Care Planning process which takes into consideration the numerous factors to be addressed in making these important decisions. The is currently no charge for their analysis.
The are many kinds of trusts which can be used: