Chicago Special Needs Planning Lawyer
Estate planning can be a difficult process, but it is a vital part of ensuring that your loved ones are cared for well into life on the terms that you decide. However, the planning process can be difficult and confusing. This is particularly true in cases where a loved one has special needs that require long-term assistance, but the decisions you make during estate planning can have a drastic impact on their ability to receive financial assistance from public sources. Utilizing a trust, however, can provide an opportunity to secure the resources your loved one will need from private funding while still allowing them to qualify for public benefits.
At Stange Law Firm, our team understands how important your family is to you, and being able to provide for them is one of your highest priorities. There are many challenges that come with estate planning when it involves someone with special needs. Our team has the skill and experience necessary to work with you and your unique family circumstances. We can help create a special needs trust in Chicago, IL that won’t result in a loss of valuable benefits that your loved one may depend on.
Special Needs Trusts
When a special needs trust is established, its purpose is to provide those with special needs with the benefits of public funding programs along with the supplemental finances of privatized assets. This money is used to increase their quality of life, provide for medical expenses, and secure an emergency resource for unexpected costs that they may incur. Special needs trusts are used for those who are impacted by either mental or physical disabilities.
Trusts that are set up for those with special needs are covered under Illinois state law Section 760 ILCS 5/15.1. Under this code, if a person has a disability that “substantially impairs” their own ability to care for themselves because of the handicap, they are allowed to have a discretionary trust and are not required to reimburse any state or public entity that provides financial assistance.
Many special needs trusts are established as a way to collect funds throughout the lifetime of those with a disability. The trusts can often be contributed to, but they structure funds in a way that the funds are not considered when determining any qualifications for Medicaid, Supplemental Security Income, and other publicly funded programs.
The way the distributions work is that funds from the trust are used for specific purposes. When funds are disbursed from the trust to the beneficiary from the trustee, the funds must be used for purchases such as:
- Living expenses, such as food, rent, utilities, and transportation
- Personal care products, including clothes, hygiene needs, or shoes
- Household goods, such as furniture, bedding, and other needs
- Medical costs that are left uncovered after other payment sources
- Other purchases that are deemed to serve the interests of the beneficiary
When the funds are disbursed, they need to be for the amounts necessary, or it could jeopardize the other funds that may be received.
Types of Special Needs Trusts
Regulated by both state and federal law, there are three main types of special needs trusts that can be established. While they each last for the lifetime of the beneficiary, there are differences in how they are established, maintained, and what happens to the funding in the event of the beneficiary’s death. The types of trusts are:
- Self-Settled Special Needs Trust: For those with special needs under the age of 65, but who have their own assets, this type of trust may be helpful. It is established by a parent, grandparent, or any other legal guardian, but the trust is funded by assets that belong to the person with a disability or through assets that they already have an entitlement to. If the beneficiary dies before the trust is fully distributed, the remainder of the assets are required to pay back any Medicaid received and then distributed in accordance with the remainder of the trust.
- Third-Party Special Needs Trust: This type of trust can be established for a person with a disability who is of any age. The trust is established by someone other than the person with the disability and is completely funded by the settlor of the trust. If the beneficiary dies, the assets are returned to the settlor of the trust, and there are no requirements to pay back the state.
- Pooled Trust: This type of trust is used for those with disabilities at any age. It is established by a parent, grandparent, legal guardian, or the disabled individual themselves. It is funded with assets belonging to the disabled individual or with funds that they are already entitled to. This type of trust requires the use of a Joinder Agreement, as the trustee must be identified as a non-profit organization. The joinder agreement dictates the rules of the trust. This type of trust essentially pools together multiple assets for all who have joined the pool. However, each individual has their own account from which funds are disbursed. Upon death, the funds become part of the trust.
These trusts offer those who need them the security of meeting their long-term financial needs without the worry of impacting other funding sources. In addition, funds that are used for establishing these types of trusts may be tax-deductible. However, the most important advantage of a special needs trust is the comfort of knowing that all the assets are going to the care and benefit of a loved one or family member who needs them to support their care.
What Are the Disadvantages of a Special Needs Trust?
While these types of trusts offer many advantages, there are other considerations to take into account. Some disadvantages of special needs trusts include:
- Cost: While each estate planning situation is unique, the costs of setting up a special needs trust could be particularly high. Often, these types of trusts require a minimum contribution to establish and may also be subjected to high maintenance costs. Speaking with your attorney while establishing the trust can help clarify what the costs may be.
- Codependency: For many individuals with disabilities, having a sense of independence is important for their mental health. However, with special needs trusts, the funds are not readily available and must be disbursed through a trustee to the beneficiary. This means that a beneficiary must still be reliant on the help of other individuals, which could exacerbate the feelings of codependency rather than be an encouragement of independence.
- Payback of Medicaid: While each type of trust is different, there may be circumstances in which Medicaid must be paid back. This could significantly drain the remaining funds from the trust.
Can You Have More Than One Power of Attorney in Illinois?
Choosing a trustee is an important decision, as they need to be able to manage the trust with fidelity. If the trust is mismanaged, and funds are inappropriately disbursed or used, it could have significant implications on the ability of the beneficiary to receive funds from other sources. Ideally, the trustee should be a trusted family member or another designated professional.
When making decisions about the trustee, it is also important to consider decisions that are made regarding who should have the power of attorney. This individual can serve as the decision-maker in place of the beneficiary, should they become incapacitated. The power of attorney and the trustee serve different purposes, with the power of attorney designee holding the authority to amend or change a trust if it is set up in a way for them to do so. Illinois allows for multiple people to hold power of attorney, but decisions may be delayed significantly in these types of cases because of the agreements that must be reached between any parties that are granted that power.
Choosing who should have the power of attorney and establishing the trustee are critical decisions that must be made carefully, as both are vital to ensuring that the person with disabilities is properly cared for. When making decisions about both a trustee and a power of attorney, consider those outside the family circle. Often, professionals can make objective decisions more easily than family.
Special Needs Planning Law Firm
Ensuring that the loved ones in your life with special needs are cared for properly likely weighs heavily on your mind. However, working with an estate planning lawyer can help give you peace of mind. They can establish a trust that can provide needed and beneficial supplemental financial support for your loved one’s everyday needs. Whether you are looking to establish a trust for your own disability expenses or on behalf of someone you love, setting a strong financial foundation can help alleviate the worries and fears that come with long-term care.
At Stange Law Firm, our attorneys understand the importance of setting up such trusts. We use care and compassion to guide our clients through the process to meet their unique needs. Whether you are looking to establish a new trust or need help with an existing trust, our team is ready to assist you and your loved ones. Contact our offices today and let our estate planning lawyers help.
Cook County (Rolling Meadows), Illinois Office (773-453-9390) | 1600 Golf Road, Suite 1264, Rolling Meadows, Illinois 60008 (by appointment only)
