What is a special needs trust?
A special needs trust saves money while allowing its beneficiary to continue qualifying for SSI or Medicaid. These programs require a recipient to have less than $2,000 in countable resources. So when a person on SSI or Medicaid receives a lump sum of money—such as an inheritance—it’s actually a problem. A special needs trust is the solution. It allows the money to be set aside to supplement, rather than supplant, public benefits.
The most common type of special needs trust in Wisconsin is a Wispact trust. Wispact, Inc. is a Wisconsin non-profit that manages pooled trusts. A pooled trust is one big trust with many sub-accounts for disabled beneficiaries. About 650 new Wispact sub-accounts are created each year, and the average amount put in each sub-account is about $35,000.
A Wispact trust is often the easiest, simplest, and fastest way to create a special needs trust in Wisconsin. It’s also usually the most affordable. That’s because Wispact has a grant program that often reimburses the legal fees involved, and because Wispact’s ongoing fees for managing the trust are much lower than other corporate trustees’ fees.
Two Common Situations
I typically use special needs trusts for clients in one of two situations.
1. My client currently receives SSI or Medicaid and just received an inheritance or other lump sum.
SSI and Medicaid require the recipient to have less than $2,000. When that person suddenly gets an inheritance, it can kick them off these important benefits and be more trouble than it’s worth. They might get a check from a relative’s estate and not cash it for months. They need the money, but they also need the benefits.
What they need is a special needs trust, and the sooner the better. This kind of trust can preserve the inheritance for their future use without disqualifying them from SSI or Medicaid. The trust becomes a helpful fund that can pay for the many things government programs won’t.
2. My client has a child with a disability and needs to plan for that child’s inheritance.
When you have a child with a disability who has or is likely to rely on SSI or Medicaid in the future, you need to include a special needs trust in your estate plan. This is the best way to ensure that child is provided for and still receives his or her fair share of your estate, while protecting their public benefits and choosing someone responsible to manage the financial side of things for them.
The Special Needs Planning Process
Establishing a Wispact Trust
- Meet for a consultation. Gather information about your current benefits, the inheritance or other money received, and its immediate effect. Discuss options for different types of special needs trusts.
- Prepare the Wispact Contribution Agreement and application documents needed to establish a Wispact sub-account. Meet to sign everything.
- Get a cashier’s check or otherwise arrange the transfer of the extra money to the trust.
- Submit everything to Wispact.
- Wispact approves the application and established the sub-account, usually within 2 weeks.
- Give any required notice to government agencies.
Planning for a Child
- Meet for a consultation to gather information about the family, estate, and the child with a disability. Discuss options for different types of special needs trusts.
- Meet to discuss the details and design the special needs trust.
- I draft the special needs trust and send it for your review.
- Answer questions and modify the draft trust as needed.
- Meet to sign the special needs trust, along with any other estate planning documents.
- Arrange for funding of the special needs trust by updating beneficiary designations and recording TOD designations, as needed.