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Special Trusts for Special People

Aug 26, 2021 | Written by: John G. Manfreda, Esq. |

My previous blogs have addressed the question of what type of estate plan might best suit your family.  Estate planning for the modern family tends to be efficient and beneficial for traditional family members.  But what if you have a child or grandchild who will need financial guidance and wealth management well into the future after you are gone?  Such a beneficiary is a prime candidate for a Total Discretion Trust or a Special Needs Trust.  Stated simply, such trusts can be established by a third party (such as a parent or grandparent) for the purpose of protecting the beneficiary’s inherited assets as well as paying for the beneficiary’s living expenses for a limited or extended period of time, as the circumstances may warrant.  Such trusts have varying levels of trustee control.  The task is to determine which type of trust best suits your intended beneficiary.

Certain government programs require that the beneficiary have no direct access to any financial resources in order to qualify for benefits.  Medicaid is one such program.  If a beneficiary is receiving Medicaid benefits, and if you were to leave an inheritance outright to that beneficiary, he or she would thereafter be disqualified from receiving Medicaid benefits.  A Special Needs Trust can be used to avoid this problem.  

The Special Needs Trust Agreement must expressly provide that the trustee may only distribute trust assets for the limited purpose of paying for the special needs of the beneficiary.  The term “special needs” generally includes the cost of providing supplemental medical and dental care, certain clothing and equipment, transportation to and from health care facilities, training programs, personal counseling, education, treatment, and essential dietary needs.  Thus, the term “special needs” enhances but also limits the trustee’s ability to disburse trust benefits for the supplemental needs of the beneficiary.  Moreover, the Special Needs Trust runs indefinitely to serve the needs of the beneficiary.  

For that reason, a Total Discretion Trust is sometimes more appropriate for someone who is expected to eventually assume control of his or her inheritance upon attaining the proper age.  With the Total Discretion Trust, the trustee has authority to distribute trust assets for the general needs of the beneficiary.  However, a Total Discretion Trust will disqualify the beneficiary from receiving most government benefits on the theory that the trust assets are available for distribution to or on behalf of the beneficiary. Therefore, the question of whether to create a Special Needs Trust or a Total Discretion Trust must be carefully considered.

Please contact me to schedule an appointment to discuss how these and other trust and estate planning techniques can be used to benefit your family.

John G. Manfreda


John G. Manfreda, Esq, is a partner with Gebhardt & Kiefer, PC. His primary practice areas involve estate and business planning; estate and trust administrationcorporate, commercial and real estate law, including asset protection planning; business succession planning and related transactional work; and the purchase and sale of businesses. He also has considerable experience in the area of probate litigation, including will contests and the defense of individual and corporate fiduciaries. Contact Mr. Manfreda at 908-735-5161 or via email.

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Any statements made herein are solely for informational purposes only and should not be relied upon or construed as legal advice.