Estate Planning For A Beneficiary With A Disability

A Special Needs Trust (SNT) is a legal tool. It helps manage money or assets for a person with a disability. This trust won't affect their eligibility for government benefits like Medicaid or SSI.

How It Works:

• The trust owns the assets instead of the individual.
• You can use the money for expenses not covered by public benefits. This includes education, transportation, hobbies, therapies, and caregiving.
• Because the assets are not in the beneficiary’s name, they don’t count toward the $2,000 SSI/Medicaid asset limit.

How It Protects Benefits:

• Medicaid and SSI have strict financial eligibility rules.
• A person with a disability might lose benefits if they inherit money or get a big gift directly.
• An SNT legally protects those assets. This way, the person can keep receiving important support. At the same time, they can enjoy a better quality of life with funds managed by the trust. 

There are three main types of Special Needs Trusts (SNTs). Each type suits a different situation. It depends on the source of the funds and who sets up the trust. Here’s a breakdown:

1. First-Party Special Needs Trust (Self-Settled SNT)
   • Who funds it?

     • A person with a disability often receives support from:

       • An inheritance.

       • A personal injury settlement.

       • Back pay from benefits.

   • Who sets it up?
     • The individual's parent, grandparent, legal guardian, or a court must establish it. The individual cannot do this unless state law permits.
   • Key feature:
     • When the beneficiary dies, leftover funds must go to repay Medicaid for the benefits received.
   • Why it’s used:
     • Keep eligibility for SSI or Medicaid if the person has countable assets.
2. Third-Party Special Needs Trust
   • Who funds it?
     • Someone else — usually a parent, grandparent, or other loved ones — using their own money.
   • Who sets it up?
     • The third party (e.g., a parent) can set it up during their lifetime or in their will.
   • Key feature:
     • No one needs to pay back Medicaid. Other family members or heirs can get the remaining funds.
   • Why it’s used:
     • When planning your estate, remember to support a loved one with a disability after the caregiver is gone.
3. Pooled Trust
   • Who funds it?
     • Either the beneficiary (like a First-Party SNT) or someone else (like a Third-Party SNT).
   • Who manages it?
     • A nonprofit organization pools funds from many beneficiaries. Each beneficiary has their sub-account.
   • Key feature:
     • Easier and less expensive to set up, especially for small amounts. Medicaid payback may apply depending on how it is funded.
   • Why it’s used:
     • When a family lacks a trustee, or if the trust amount is too small, they may not need a stand-alone SNT.

A Special Needs Trust (SNT) can cover many costs that improve life for a person with a disability. But these payments mustn’t affect eligibility for benefits like SSI or Medicaid. We call these costs “supplemental needs.” They cover extras like food and shelter that public benefits usually don’t include.

Common Allowable Expenses SNTs Can Cover:

• Housing-related costs (with caution for SSI recipients)
  • Rent (may reduce SSI benefits)
  • Utilities
  • Repairs and maintenance
  • Property taxes and insurance
• Medical & health care needs
  • Out-of-pocket medical or dental expenses
  • Therapy or rehabilitation services
  • Specialized equipment or assistive technology
  • Alternative or holistic treatments not covered by Medicaid
• Personal care & support
  • Caregivers or companions
  • Home health aides
  • Transportation to appointments
• Education & training
  • Tuition and books
  • Vocational programs
  • Tutoring
• Transportation
  • Public transportation passes
  • Ride services (e.g. Uber, paratransit)
  • Vehicle purchase or modifications for accessibility
• Recreation & quality of life
  • Vacations or travel
  • Internet and phone service
  • Hobbies, games, and entertainment
  • Gym memberships or classes
  • Cultural events or outings
• Legal and professional services
  • Attorneys, advocates, financial planners, or accountants

Important Notes:

• Direct cash payments to the beneficiary can reduce or eliminate SSI.
• You can use payments for food and shelter, like rent or groceries. However, these may lower your SSI benefits. So, it's important to work closely with a benefits planner or attorney. For more information, see Finding and Hiring a Lawyer. 

Picking a trustee for a Special Needs Trust (SNT) is a key decision. This person or organization will handle your loved one’s money. They must also follow complex rules to safeguard benefits. They will act in your loved one’s best interest for many years, even decades, which is crucial.

Traits of a Good Trustee:

• Trustworthy and financially responsible
• Detail-oriented with strong recordkeeping skills
• Familiar with (or willing to learn) SSI/Medicaid rules
• Willing to consult professionals, like attorneys or benefits advisors
• Good communicator — especially if coordinating with caregivers or family

Possible Trustee Options:

1. Family Member or Friend
   • Pros: The person knows the beneficiary personally and understands family values
   • Cons: May be emotionally overwhelmed or unfamiliar with complex rules
2. Professional Trustee (Attorney, CPA, Trust Company)
   • Pros: Skilled in managing trusts, legally trained, unbiased
   • Cons: Charges fees (usually a percentage of the trust), less personal
3. Nonprofit Pooled Trust Organization
   • Pros: Specializes in managing Special Needs Trusts; often more affordable for small trusts
   • Cons: Less individual control; funds are pooled and managed collectively
4. Co-Trustee Setup
   • You can choose a family member and a professional to work together. This combines personal knowledge with legal and financial skills.
5. Successor Trustees
   • Always name backups in case your primary trustee can’t serve in the future.

Interdiction is a legal process in Louisiana. It takes away a person's right to make their own decisions. This happens when someone cannot decide for themselves due to a disability, illness, or mental incapacity.

It’s a court process. A judge declares someone legally interdicted and appoints:

• A curator – someone who makes decisions on a person’s behalf (like a guardian).
• An under-curator – who monitors the curator and acts as a safeguard.

When Is It Necessary

When the situation calls for interdiction:

• The person did not execute a Power of Attorney (POA) while they had the capacity. 
• They are unable to make informed decisions about healthcare, money, or daily needs.
• Their condition can cause harm if there isn't legal action. This includes issues like dementia, serious brain injury, or developmental disability.

In Louisiana, full and limited interdiction differ in how much decision-making power they remove from a person with a disability. Full interdiction removes more power, while limited interdiction lets them keep some control.

Full Interdiction

• What it means:
  • The court removes all legal capacity from the individual.
• When it’s used:
  • When someone can't make meaningful decisions, even with help.
• Examples:
  • Someone in a coma, has advanced dementia, or has a severe intellectual disability can't make choices about their healthcare, finances, or safety.
• Curator’s role:
  • Has full authority over the person’s personal, medical, and financial decisions.

Limited Interdiction

• What it means:
  • The court removes only specific legal rights — and the person retains others.
• When it’s used:
  • When the person can make some decisions on their own, such as managing daily life, but requires help with complex finances.
• Examples:
  • A person with a brain injury can live on their own but needs help with money or medical care.
• Curator’s role:
  • Can only act in the areas specified by the court (like healthcare, finances, or contracts).

In Louisiana, continuing tutorship is a legal process. It allows parents or guardians to control decisions for a child with an intellectual disability when they turn 18. This arrangement extends the individual's legal minority. The tutor can handle personal, medical, and financial decisions for them.

Eligibility Criteria:

To qualify for a continuing tutorship in Louisiana, the following conditions must be met:

1. Age: The individual must be between 15 and 18 years old. You must file the petition for continuing tutorship before the individual turns 18
2. Intellectual Functioning: The person should have below two-thirds of the average intellectual or adaptive skills for their age group. This usually shows up in standardized tests given by qualified pros, like psychologists, or other court-accepted evidence.
3. Parental or Guardian Petition: Parents or the legal guardian can file the petition. This applies if one or both parents are deceased, incapacitated, or absent.

1. Petition Filing: Parents or legal guardians need to file a petition with the district court in their parish. This petition requests a continuing tutorship. This petition must show proof of the person's intellectual disability and the agreement of the parish coroner.
2. Court Evaluation: The court looks at the evidence provided. This includes medical and psychological assessments. They decide if the individual still qualifies for tutorship.
3. Appointment of Tutor: If the court approves the petition, it will name the petitioner(s) as the tutor(s). This gives them the legal power to make decisions for the individual.

An ABLE account (Achieving a Better Life Experience account) helps people with disabilities save money. It's tax-advantaged, which means you can grow your savings without paying taxes on the growth. It helps them save money for approved costs. Plus, it keeps their benefits like SSI or Medicaid.

What Is an ABLE Account?

• Created under federal law (2014) and available in Louisiana.
• Available to individuals whose disabilities began before age 26.
• 2023 annual contribution limit: $17,000 (adjusts yearly).
• The first $100,000 in the account does not count against SSI’s $2,000 asset limit.
• You can use the funds for qualified disability expenses: housing, education, healthcare, transportation, etc.
• Income earned in the account is tax-free if used for qualified expenses.

Yes, a person with a disability can have both a Special Needs Trust (SNT) and an ABLE account. Using them together is often a smart strategy.

How They Work Together:

• You can direct the SNT to fund the ABLE account in manageable amounts each year (up to $17,000/year in 2023).
• You can use the ABLE account for everyday costs, such as rent, groceries, or transportation. This won’t affect your SSI or Medicaid as long as you follow ABLE rules.
• This setup helps prevent SSI cuts. These cuts could occur if the trust paid for housing or food directly.

Why Use Both?

Each tool has its strengths. When you combine them, you gain flexibility and better protection:

If you have a child or dependent with a disability, you need key estate planning documents. These documents protect their future and ensure their care. They also help keep access to important public benefits like Medicaid and SSI. Here’s what you will want to include:

1. Will
   • Allows you to:
     • Direct who inherits your assets.
     • Appoint a guardian or tutor for your child.
     • Name a trustee for a Special Needs Trust (SNT).
   • Don't leave assets directly to your child. Use a trust to protect their benefit eligibility.
   • For more information, see the resource Wills. 

2. Power of Attorney (POA)

   • This lets a trusted person handle your money or legal matters if you can't.

   • This helps prevent court involvement, like interdiction, later on.

   • For more information, see the resource Power of Attorney (POA). 

3. Living Will (Advance Directive)

   • This states your wishes about end-of-life care so loved ones don’t have to guess.

   • Helps ensure your decisions align with your values and may reduce family conflict.

   • For more information, see the resource Living Wills. 

4. Healthcare Power of Attorney (HCPOA)

   • Authorizes someone to make medical decisions for you if you’re unable to.

   • You can also include care preferences for your child if you become incapacitated.

   • For more information, see the resource Healthcare Power of Attorney (HCPOA). 

5. Special Needs Trust (SNT)

   • This holds assets for your child without disqualifying them from means-tested programs.

   • Pays for supplemental needs like therapies, personal care, or recreation.

   • You can create it within your will (testamentary) or as a standalone trust (living trust).

   • For more information, see the resource Trusts. 

Create a will, power of attorney, and living will as soon as you take on legal or caregiving duties. This is especially important if you have a child or dependent with a disability. Here’s when each document becomes especially important:

Will

Create it now if:

• You want to decide who gets your assets after you die
• You have children or dependents and need to appoint a guardian or tutor
• You plan to set up a Special Needs Trust for a loved one with a disability

A will ensures your wishes are followed and avoids the state deciding for you through intestacy laws.

Power of Attorney (POA)

Create it now if:

• You want someone you trust to handle your financial or legal affairs if you become incapacitated.
• You’re aging, managing a chronic illness, or just want to avoid court involvement (like interdiction).

Without a POA, your family may need to go through the court to make basic decisions on your behalf.

Living Will (Advance Directive)

Create it now if:

• You want to document your end-of-life care preferences
• You want to reduce the emotional burden on your loved ones
• You want your wishes respected if you’re unable to speak for yourself

This document is especially important in medical emergencies or for long-term care planning.

You can leave money to a person with a disability in your will. But usually, you shouldn’t if they get or might need means-tested benefits like SSI or Medicaid. 

Leaving money directly to a person with a disability in your will can cause problems. If they get funds directly, those assets could count against the strict limits for means-tested benefits like SSI and Medicaid. This could result in a loss of benefits that are

To avoid this risk, it’s generally recommended to transfer assets into a Special Needs Trust (SNT). This way, a trustee manages the money. It won’t count as the beneficiary’s asset, so they can keep their eligibility for public assistance.