Planning for Disabled Children/Adults (Part 2)

In my last article I talked about Planning for Disabled Children. Depending on the level of disability, parents have several options to consider to help them determine how to best continue to support and care for their child.

Planning for an individual with special needs provides a unique challenge.  Many of these individuals may not be able to provide for themselves, parents are concerned with the quality of care they will receive and who will care for them when mom and dad are no longer able or have passed away.  Naming a trustee, executor or guardian for these individuals can be very difficult for parents.  In addition, will there be sufficient funds available for this individual for the rest of their life?

If your child is eligible for assistance through a county/state or federal program, you will likely be subject to certain restrictions on the amount of assets your child can have to continue to maintain eligibility for these programs.  Not all programs have this restriction.  The Minnesota ABLE plan I mentioned in my last column is one solution that allows a disabled person to accumulate some savings without jeopardizing their eligibility for assistance.  ABLE is an acronym that stands for Achieving a Better Living Experience, check out

Because of this asset restriction and the disabled individual’s inability to manage their own financial affairs, many parents look at creating a trust to supplement the assistance the individual is receiving to help meet the needs of caring for this disabled individual.

There are two types of supplemental trusts for persons with a disability.  The first is called a Special Needs Trust (“SNT”).  The SNT is set up using the funds of the disabled individual, it is often called a “first party special needs trust.”  If the individual received a settlement for their disability, this is the type of trust that would be established.  Because of the in-depth rules relating to this type of trust it is very important that the attorney drafting this document understand the programs the individual is participating in and the trust laws.

The second type of supplement trust is called a Supplemental Needs Trust (“SupNT”).  This type of trust is often referred to as a “third party special needs trust,” since it is set up using the funds of someone other than the disabled individual.  For example, the disabled individual’s grandparent or parent passes away leaving money to the disabled individual.  That money is often the money used to fund the disabled child’s SupNT.  This is by far the more common of the two supplemental trusts.

Both trusts are intended to “supplement” the disabled individual’s current government benefits they are receiving.  It is extremely important that the person acting as trustee of these trusts understand what things can be paid for from the SNT and the SupNT so they don’t conflict with the government benefits.  In addition, there are other conditions that must be met to be able to set up these types of trust.

Some families elect to go with a third option, which is the establishment of a purely discretionary trust for the benefit of their disabled child.  A lot of the same considerations apply, who will be the trustee, what can we pay for from this trust, what happens to the assets in the trust when my child passes away?

Parents are really doing double duty for disabled individuals.  They are working to make sure their disabled child has the appropriate estate planning paperwork in place and that they can continue to act on behalf of their disabled child.  However, parents/grandparents also need to think about what they set up in their own estate plan so that it coordinates with the plan for their disabled child/grandchild and they are referencing the child’s trust in their own plan.

Please send me an email at with any topic suggestions or requests you may have.  Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know.  Our purpose is to educate and we hope that you can take something new away from this column each time you read it.