Special Needs Trusts and Your Will

A colleague asked me when a special needs trust is written into a will, does a new document creating the trust need to be drafted. I answered that if the trust was created properly, then no.

However, this raised a separate question for me. Why was the special needs trust created by will, as opposed to a living trust?

To back up, a special needs trust is an instrument to make funds available to benefit a person with disabilities, so that the person would not be disqualified for public assistance. It must be drafted and administered properly, or else the funds in the trust can be considered resources, and thus disqualify the person for government programs such as Medicaid.

The problem with writing a special needs trust in the will is that the will has to be probated. Once the will is probated, here in Virginia, the Commissioner of Accounts for that county will be responsible to oversee the administration of the trust. This will necessarily involve the filing of inventories and accountings, filing fees, and the expense of hiring professionals, such as a lawyer and accountant, to make sure the filings are done properly. All of this can add to the hassle and expense of administering the trust.

A better way to handle the desire to make a special needs trust as part of an estate plan is to create the trust as part of a living trust. That way, upon death, the trust does not have to go through probate, and you do not have the watchful eye of the Commissioner of Accounts over you.

If you want to benefit a person with disabilities through your estate plan, it is best to consult a lawyer experienced and educated in special needs trusts to assist you and create the most efficient plan for you.