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| Best Practices: Matters of Trust |
Best Intentions
Danna Voth
12/01/2004
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Robert and Evelyn Hausslein of Lexington, Mass., knew within a few years of
their son Tommy’s birth that he was mentally retarded. “We became aware of the
need to build wills and estate planning around that,” Robert recalls. Hausslein
and his wife were happy that they had the means to care for Tommy, but they
nonetheless needed to be sure that their help did not jeopardize his government
benefits, such as Medicaid. The health insurance provided by Medicaid was
important, despite the family’s affluence, Hausslein explains, “because medical
expenses are just open-ended. You never know what’s going to
happen.”
| “With a special-needs trust I’m able to help her to have a lifestyle that’s more than just being maintained.” |
To remain eligible for government benefits, Tommy could
not personally own assets worth more than $2,000. In fact, he once lost his
benefits, and the family spent months regaining his eligibility. “I was so
frustrated,” Hausslein says. “I said, ‘Do you mean that if he has $2,000.01 he
is disqualified, but if he has $1999.99, he’s OK?’ The answer was ‘Yes.’ ”
By
establishing a third-party, special-needs trust, the Haussleins were able to
secure their son’s financial future. This legal instrument, a fiduciary tool
that holds and disburses funds for the benefit of a child with special needs,
can supplement government benefits the child may receive without putting them at
risk.
With a carefully designed special-needs trust, we can find some
gratification in knowing those who depend on us will be well cared for after we
die. Andrew Crim of Ashland, Mass., has set up such a trust for his daughter,
Carolyn, who has cerebral palsy and is mentally retarded. The trust will be
funded upon his death; he says having it is critical to his peace of mind. “With
a special-needs trust, I’m able to help her to have a lifestyle that’s more than
just being maintained,” he explains.
 The Benefit of Benefits
As the Haussleins discovered, monetary gifts and
awards that we make to our children—anything more than $2,000 a year in
value—can disqualify them from receiving essential government benefits. Theresa
Varnet, an attorney with Spain, Spain & Varnet in Chicago, who has a
daughter with special needs, says, “Unfortunately, most of our kids, mine
included, will never be able to get health insurance on their own. Depending on
the magnitude of the medical condition that the child has, it’s almost
impossible to self-insure.”
In addition to securing access to public programs
such as Medicaid, special-needs trusts protect a child’s right to services and
equipment needed by people with disabilities that are only available through
government programs. Certain items may even be unattainable without public
assistance. “Agencies might have better access to some kinds of durable medical
equipment than someone who wants to pay for them,” says John Nadworny, a
certified financial planner with Bay Financial Associates in Waltham, Mass., who
advises parents on establishing special-needs trusts. Nadworny notes that even
when we insist on paying the costs of our child’s special-needs care, we may not
have that option. “Some agencies are not set up for private pay.”
To maintain
our children’s eligibility, our wills, retirement accounts, legal settlements
and insurance policies should list the trust—and not our children—as the
beneficiary. All of our friends and relatives, our child’s caregivers and people
assisting us with fiduciary documents should understand the necessity of keeping
assets out of our child’s name. Our child cannot receive any checks or cash from
the trust, even if it is only pocket money.
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