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Special Needs Trusts Give Caregivers
Peace of Mind
By Bernard A. Krooks
Certified Elder Law Attorney
W e all know the importance
of getting
our financial and
legal affairs in order. With Alzheimer’s
disease, the importance of
advanced planning is magnified. One item often overlooked
is what happens if the caregiver
passes away before the family
member with AD. There is no
perfect replacement for a
caregiver’s love and care, but some
planning methods are better than
others.
Consider this situation: John
and Sally have a modest estate – a
home, some money in the bank and retirement accounts
from when they were both working. They also have two
adult children: Emily is independent and doing well
financially; Charlie is married, bouncing from job to job,
and can’t seem to hold onto money when it comes his
way. Emily has given up her job to help her mother care
for her father, who has Alzheimer’s disease. He is not able
to live independently or support himself, and will need
a home, income and support system for the rest of his
life to avoid going into a nursing home. Charlie is not
involved, but has promised to help if anything happens to
Sally or Emily.
Without planning, the inheritance John will receive
from Sally or Emily (if either of them passes away before
him) may prevent him from obtaining some types of
government assistance. For example, if he is on Medicaid,
his inheritance could disqualify him from benefits until
his money is spent down, since all Medicaid beneficiaries
must meet strict asset and income requirements. (John
may be entitled to some other benefit programs, but
requirements are different for each.)
To avoid this scenario, Emily and Sally are considering
leaving all of their assets to the survivor of the two of them, or to Charlie if anything happens to both of them. But
this is not a good solution, because no assets are legally
protected for John. Moreover, Charlie may not live up
to his commitment to take care of John due to financial
problems, illness, divorce or his own death. John’s security
is imperiled.
A better solution is the creation of a third-party special
needs trust (also known as a supplemental needs trust)
which does not rely on the moral commitments of others
to be successful. The assets used to fund the trust could
be those of Emily and Sally, and the trust part of Emily or
Sally’s testamentary distribution plan when they die.
The term “third-party” special needs trust (SNT)
means that the assets used to fund the trust do not belong
to John: they are assets of a “third-party.” The SNT
would be carefully drafted so that the trust’s assets could
be used to pay for goods and services that would enhance
the quality of John’s lifestyle, without causing him to lose
his needs-based benefits.
SNTs are designed to allow the beneficiary to maintain
eligibility for most means-tested programs. For example,
the state Medicaid system may pay very little in the way
of private duty nurses; but the funds in the SNT can be
used for this purpose. Also, the funds in the SNT can
be used to take John on vacations or other quality-oflife
excursions. Neither of these distributions will reduce
John’s needs-based benefits.
Of course, there is no one perfect solution for every
family. But it is important to plan ahead to provide care
for your family member with Alzheimer’s disease.
Bernard A. Krooks, a Certified Elder Law Attorney, is a founding partner
of Littman Krooks LLP, an elder law firm based in Manhattan. Mr.
Krooks is past President of the National Academy of Elder Law Attorneys
(NAELA), past President of the NY Chapter of NAELA, and past Chair
of the Elder Law Section of the New York State Bar Association. For
more information about Mr. Krooks and Littman Krooks LLP, please visit
www.littmankrooks.com.
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