Special Needs Trust

Leaving Assets To A Louisiana Special Needs Trust

Special Needs Trusts enable people, typically parents, to provide for another (typically, their child), without jeopardizing the government benefits that the special needs child is receiving.

There is typically a problem when parents bequeath assets to their special needs children. When the child inherits in his or her own name, the child could lose valuable government benefits that the child is receiving. In order to originally qualify for these benefits, the child had to be "means-tested." Often, the child must have and maintain no more than $2,000 in their name to receive these benefits. If the child receives an inheritance, the child may lose these valuable benefits.

So many parents leave assets for the special needs child in a third-party Special Needs Trust. When done properly, the trust can enhance and enrich the child's life while preserving the government benefits that are means-tested.

In general, there are certain provisions that should not be included in a trust that you leave behind for your special needs child.  The trust should not authorize the trustee to make broad distributions to or for the health, education, maintenance, or support of the child (known as the "HEMS" standard). 

In addition, the trust must not allow the child/beneficiary to compel distributions to himself or herself.

However, there are a number of permissible distributions to or for the benefit of the special needs child, including distributions for medical needs, travel, recreation, home improvements, auto expenses, and cleaning, to name a few.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

The Louisiana Special Needs Trust - and Forced Heirship

It's common these days for Louisiana families to want to leave assets to someone who has what is commonly referred to as "Special Needs."

People who have "Special Needs" are typically defined as someone who, as a result of a disability, is receiving some sort of federal or state government aid. In order to continue to receive these government benefits, it is often required that the recipient's assets be maintained under a certain amount or value.

When you leave assets to someone who is benefiting from certain kinds of federal or state aid due to a condition which renders them unable to care for themself, the inheritance can disqualify them from future benefits.

So, many people who wish to leave an inheritance to someone with "Special Needs," often uses their Will or Trust to leave the inheritance to a trust. Not any trust but a special type of trust that is commonly referred to as a Special Needs Trust.

The idea here is that if the trust can be used to replace the government benefits, then that trust may disqualify the recipient from receiving future government benefits. But if the trust is designed to supplement the public assistance, then the government benefits may be preserved. 

The continued access to the government programs may be necessary for the person to maintain a level of dignity and humane care.

Further, in Louisiana, residents must also be aware of Louisiana Forced Heirship laws when they are setting up their estate planning program. Louisiana forced heirship laws generally provide, in part, that if you have a child of any age that is incapacitated, then you cannot disinherit them. If you leave a forced heir's portion in a trust, you must meet the requirements of the "forced portion in trust" provisions.

You can refer to my book, "Estate Planning in Louisiana," if you want to know more. Or, you can call our office at 866-491-3884, to start a conversation about establishing and maintaining an estate legal program that protects what you have for yourself and your loved ones.