Florida Trust Law: Distributions To Special Needs Family Members

The term “special needs” typically refers to a mental or physical disability that results in special financial needs. A mentally challenged child, for example, might need to be cared for long after reaching adulthood, while an adult who was disabled in a car accident may find himself unable to work for the rest of his life. The Florida estate planning arsenal includes certain devices designed especially for such situations.

The primary motivation for establishing a special needs trust (special needs trust) is to provide for the needs of a disabled person without thereby rendering him ineligible for means-tested public benefits such as:

• SSI
• SSDI
• Medicaid
• Medicare
• Veterans’ benefits

Since it is possible to be “too rich” to qualify for these benefits, special needs trust benefits are not distributed to the beneficiary in cash — instead, benefits are paid in kind, so that it will not count as income to the beneficiary. The trust may pay tuition on behalf of the beneficiary, for example. Special needs trusts protect a disabled person’s eligibility for these benefits with varying degrees of effectiveness, and the rules can get complex in some cases (especially with veterans’ benefits).

Types of Special Needs Trusts

Although many different types of special needs trusts are available, they can be reduced to two different categories — third-party special needs trusts and first-party special needs trusts.

Third-Party special needs trusts

A third party special needs trust is established by someone other than the special needs beneficiary. Different varieties exist — testamentary trusts, which are established by your last will and testament; living trusts and stand-alone trusts. Stand-alone trusts are arguably the most popular because they allow just about anyone to contribute to the trust, both before and after the death of the person who established the trust.

Third-party trusts are typically established by family members of the beneficiary, and in many cases various family members contribute to it. The trust can even be revocable, as long as the beneficiary himself does not have the power to revoke it.

First-Party special needs trusts

In a first-party special needs trust, the first party” is the disabled beneficiary himself. Suppose, for example that someone is disabled as a result of a catastrophic truck accident and wins a large personal injury settlement. Or, alternatively, suppose that a disabled person inherits a large amount of money and property. These assets could be placed into a first-party special needs trust, administered by a qualified and prudent trustee for the best interests of the disabled person.

Contact Lorenzo Law Today

If you are considering creating an estate plan, especially if one or more of your beneficiaries is burdened with special needs, you must plan carefully to realize your intentions. Florida trust law is filled with hidden traps that could spring years or even decades down the road.

Contact Lorenzo Law immediately for a free. confidential consultation on your case. Although we maintain offices in Coral Gables and Ft. Lauderdale, we serve clients throughout Florida.

We can be reached by telephone at (305) 999-5411,through our online intake form, by email at jml@joselorenzolaw.com or by visiting one of our offices.