Using A Trust For A Disabled Family Member
by
Herbert D. Hinkle, Esq. and S. Paul Prior, Esq.
Hinkle & Fingles, Attorneys at Law
2651 Main Street
Lawrenceville, New Jersey 08648
(609) 896-4200 or (215) 860-2100
Securing the financial future of a son or daughter with a severe
disability is a tremendous challenge. A trust can be used to protect
the financial future of a person with a disability.
A trust is a legal document used to control property. Property is
anything of value: real estate, cash, insurance policies, stocks and
bonds, etc. There are two types of trusts: (1) Living Trusts (trusts
created during the lifetime of the person who establishes the trust);
and (2) Testamentary Trusts (trusts created in a Will). A living Trust
is the preferred arrangement to protect people with disabilities.
A testamentary trust can only be funded at death. A living trust can
be funded during the person’s lifetime or at death. Often, parents
will arrange to fund the trust at death, but plans must also exist to
ensure the trust will be funded in the event of incapacity.
A living trust can be funded directly with the proceeds of life
insurance, with pension benefits, or with gifts from the parents or
other relatives. Lifetime gifts are sometimes made to reduce taxes, or
to ensure that the expense of chronic illness or nursing home care
does not wipe out the assets of the parents, leaving nothing to
transfer into trust at death.
The job of the trustee is to manage the trust funds. The trustee is
designated when the trust is signed. The trustee can be a family
member, a friend, a bank, a professional, or some combination, like a
bank and a relative.
Often, clients come in with trusts that are set up for the welfare,
support or care of the disabled person. Such trusts might do more harm
than good, because they can lead to the loss of SSI and Medicaid, and
can be quickly depleted by government claims for reimbursement for
care provided in the past. To avoid these problems, the trust must be
designed to provide exclusively for the protection of the disabled
person and to pay only for care that cannot be met through other
sources. This is sometimes called a “special needs trust,” but just
giving a trust this name does not guarantee it will work.
What protection can a trust provide? Trust funds can be used to ensure
that interested people visit the disabled person frequently. Funds can
purchase independent professional opinions as are necessary. Gaps in
services can be filled, and additional recreation or other amenities
can be provided.
At the death of the person with a disability, the property will be
disposed of according to the instructions written in the trust
document. For instance, property might go to family members or to
charity.
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Herbert D.
Hinkle, his partner, Ira M. Fingles and their colleague, S. Paul
Prior, maintain a statewide
law practice with offices in Lawrenceville, Marlton, and Florham Park,
New Jersey, and Yardley, Pennsylvania. They lecture and write frequently
on topics of law, aging, disability and estate planning and are available
to speak to groups in New Jersey and Pennsylvania
at no charge.
Comments and suggestions
for future articles should be mailed to: Hinkle & Fingles, 2651 Main Street, Suite A, Lawrenceville, New Jersey 08648-1012.
Copyright 2004
Herbert D. Hinkle. All rights reserved.
