The moment you become a parent, the need to have an estate plan in place becomes apparent. If you are the aren’t of a child with special needs, the need for a well thought out and comprehensive estate plan is heightened. Care must be taken when providing for your child because making direct gifts can do more harm than good. As part of your special needs planning component within that estate plan, you may choose to create a Special Needs Trust. A Port St. Lucie special needs planning attorney at Kulas & Crawford explains why you may also wish to include a Memorandum of Intent with your Special Needs Trust.
What Is a Special Needs Trust?
A special needs trusts (SNT), also referred to as a “supplemental needs trust,” is designed to supplement, not replace, the kind of basic support provided by government programs like Medicaid and Supplemental Security Income (SSI). A special needs trusts may pay for comforts and luxuries that cannot be paid for by public assistance funds. For example, funds from a special needs trust could be used to take your child on a vacation or to purchase a vehicle. The funds held in an SNT cannot be used to pay regularly recurring bills nor given directly to the beneficiary because doing so could cause the funds to be counted as income. That, in turn, could result in ineligibility for assistance programs such as Medicaid and SSI which have income limits.
You will need to appoint someone as the Trustee of your special needs trust. Your Trustee will have complete discretion over the trust property and will be in charge of spending money on behalf of the beneficiary (your child). Given your Trustee’s role, you should appoint someone who knows your child and his/her needs and abilities well as well as someone who has a financial background or education. An SNT can be activated during your lifetime or it can activate upon your death. In addition, other family members can contribute to the trust while they are alive and/or as part of their estate plan after they are gone. To ensure that the trust meets the guidelines for being considered a special needs trust, you should work with your special needs attorney during the creation of the trust.
Making Use of a Memorandum of Intent
Because the Special Needs Trust you create will likely survive you, it is imperative that you provide as much direction and guidance as possible to your Trustee to ensure that the trust will be used as you intended. One way to do that is to include a Memorandum of Intent, also referred to as a “Letter of Intent,” with the trust. Creating a Memorandum of Intent (MOI) allows you to put down in writing important information that your Trustee should know about your child. Given that your Trustee will be responsible for deciding how and when assets from the SNT are distributed, it only makes sense that your Trustee should know as much as possible about your child’s abilities, routines, likes and dislikes, and any particular interests they may have. Although an MOI is not a legally binding document, it can be a very valuable addition to your SNT because it helps your Trustee with the practical aspects of administering the trust. If you have chosen the right Trustee, the information you include in your MOI will be invaluable given the fact that your child may not be capable of communicating that same information to the Trustee.
The information you choose to include in your MOI is up to you, however, you may wish to include family and medical history, religious beliefs, and favorite activities, as well as some background information on your child’s upbringing. It is also a good idea to include information pertaining to the people and relationships that are important to your child in the MOI because those people can be an invaluable resource to your Trustee. Finally, if you have any specific wishes or hopes for your child’s future, include those in your Memorandum of Intent so your Trustee can help make those wishes come true.
Contact Port St. Lucie Special Needs Planning Attorneys
To learn more, please download our FREE solid estate plan checklist. If you have additional questions or concerns about special needs planning, please contact the experienced Port St. Lucie special needs planning attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.