Special Needs Planning & Taxes

The four-part series on Special Needs Planning draws to a close this week, with a focus on taxes within a Special Needs Trust. Visit the three earlier blog entries this month for the most frequently questions Morton Elder Law receives about Special Needs Planning for your child.

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How is the income of a Special Needs Trust taxed?

The way that a Special Needs Trust is taxed depends on the kind of trust it is.

  • D4A Special Needs Trust (also referred to as a Grantor Trust)– This trust is taxed on a child’s individual level. The trust itself is ignored and income is reported on the beneficiary’s individual tax return.
  •  Third Party Trust – If a third party trust is created, then typically the trust is treated as a separate taxpayer. It will include a separate tax ID number. The income will need to be reported separately by the trust and taxed at trust income tax rates.

For more basics on Special Needs Trusts, check out the NOLO website.

With careful drafting, a Third-Party Trust can become a grantor, but this takes someone very well versed in the nuances of federal income tax of trusts.

The Academy of Special Needs Planners is a great resource for understanding more basics about the law surrounding Special Needs Trusts and taxation.

The Right People, for the Right Job!

Caring and planning for your special needs child can be overwhelming. At Morton Elder Law, it is our speciality. With great care and intentionality, we will set you and your child up for the most protection and success.

You’ve got questions, we’ve got answers. Contact Morton Elder Law today to set up an appointment.

~ Ronald Morton

Special Needs Children Require Special Planning Webinar

I just finished delivering a Webinar on Special Needs Trusts Planning.  You can watch the replay below.

Special Needs Planning & Disability Benefits

This month Morton Elder Law is focusing on the most frequently asked questions related to Special Needs Planning. Last week we covered the different forms of Special Needs Trusts available. This week, the focus is on Social Security Disability Benefits, and how a special needs trust can benefit your child with special needs.

Morton Elder Law disability benefits & special needs planning

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If my child is receiving Social Security Disability Benefits (SSDI), is it still necessary for me to leave their inheritance in a Special Needs Trust?

While it isn’t necessary, it is very well advisable to leave your child’s inheritance in a special needs trust if your child is receiving social security disability benefits.

The reason it is not necessary to leave their inheritance in a special needs trust, is because Social Security Disability Insurance (SSDI) benefits are not means tested. (For example, if a person inherits one million dollars, they will still get their disability kit.)

However, putting their inheritance in a special needs trust will most likely still work in your child’s favor.  Here’s why:

The fact that your child is getting SSDI means that they have some form of disability. If that disability progresses or gets worse, they may need additional public benefits (such as nursing home care). This required later benefit could very well be a means-tested public benefit, such as Medicaid.

If that is the case, then the inheritance that went directly to the child that didn’t impact SSDI would disqualify them for Medicaid benefits.

Setting up a Special Needs Trust is simply the best way to guarantee you and your child are given the best protection and care, both in the present and the future.

It’s most advisable to put an inheritance in a Special Needs Trust, to ensure that they will have the benefits they deserve for the entire time they will need to utilize them.

For more facts on the partnership between disability and social security in the United States, check out the Social Security website.

Trust a Professional!

While we’re happy to offer free resources online regarding Special Needs Planning, it is important to note that every family’s circumstances will vary. The best way to ensure that you’re making wise financial choices is to seek the counsel of a professional, budget permitting.

Morton Elder Law recommends a customized plan that’s proactive — meeting your family’s needs with great intentionality and care.

Call Morton Elder Law today at 866-925-9797 to find out more.

Special Needs Planning & Medicaid

Last week, in the blog, we covered the reasons gifting a special needs child’s inheritance to their siblings is harmful. This week we approach another frequently asked question regarding Special Needs Planning: the laws surrounding Medicaid.

Morton Elder Law Special needs planning & Medicaid


If I create a Special Needs Trust, does the money have to go to reimburse Medicaid when my child dies?

The answer to this is, no, if the funds used for the trust do not already belong to your child. If a special needs trust has been created prior to the passing of the child, the money doesn’t necessarily go back to Medicaid when the child dies. However, the way you go about setting up your trust does matters. If the trust is established after your death, such as by a guardian or the court, any funds remaining in the trust at the time of your child’s death must be used to reimburse Medicaid for anything they have spent on your child’s care before it goes to other family members.

Why Create a Special Needs Trust?

Most special needs children rely upon Medicaid. If there is too much money left in their name (be it inheritance, award, personal injury case, etc.), they can and will become ineligible for many public benefits. That is where a Special Needs Trust can help. It allows you to provide for your child without impacting their Medicare eligibility, assuming it is set up correctly.

There are two different types of trusts to consider: First Party Trust or Third Party Trust:

  • A First Party Trust is funded by the person with special needs–perhaps through inheritance, an award, or personal injury case, for example. This trust, which gives the child the legal right to inherit, is usually the only default when a parent or guardian doesn’t do any planning.

This is problematic because:

  • The child is likely to become over-resourced and lose their benefits or
  • The child, through a guardian, grandparent, or court, can establish a special needs trust, but that special needs trust must repay Medicaid at the child’s death.  See statute 42 USC 1396p(d)(4)(a) Trust.

What does the above information mean for you? It is much better for the parent or legal guardian to set up a third-party special needs trust ahead of time, than it is to rely on the statute itself.

  • A Third Party Trust is funded by someone other than the individual with special needs, such as parents or other family members. Under the general trust, estate, and property law, the parent or guardian has full control over their own assets and can leave those assets subject to any restrictions they choose. This includes the ability to put strings or limitations on the trust that limit Medicaid’s ability to count the assets as belonging to the child.

As long as a Special Needs Trust has been established for the child prior to their death, the trust money can be directed wherever the parents (or legal guardian), would like it to go following the child’s death, including charities or siblings. 


Knowledge is Power!

Read more about the past, present, and future of Special Needs Planning and Medicaid at the National Academy of Elder Law.

To summarize, setting up a Third Party Trust for you and your special needs child will have innumerable benefits, and it should be done as soon as possible.

Morton Elder Law is here to help with this. Please contact us with any questions you may have; we will get you the answers you need!


~ Ronald Morton


Special Needs Planning & Inheritance

This month Morton Elder Law is focusing on the most frequently asked questions related to Special Needs Planning and Inheritance. Check in every week for updates that will benefit you and your loved ones.

Morton Elder Law Special needs planning


I have a child receiving public benefits through disability, should I give their inheritance to a sibling?

The short answer is NO, you shouldn’t give inheritance to a sibling of a special needs child.  Leaving your special needs child an inheritance (be it in their name, or their sibling’s name) can do more harm than good.

4 Key Reasons Not to Gift Inheritance to a Sibling

  1. According to Federal Law, a special needs child with money and assets beyond $2,000 in his or her name will become ineligible for public benefits. An inheritance would make receiving means-tested government benefits difficult, if not impossible.
  2. There is no guarantee the money will be used for the special needs child. Depending on the child’s disability, money given directly to a child with a disability may be susceptible to mismanagement or being squandered by a disabled child, or perhaps even stolen by an unscrupulous person who may take advantage of someone with a disability.
  3. Money could easily get lost if not protected. For example, even with a well-intentioned sibling, an unexpected life event, such as divorce, creditor claim, or even a prior death could and would unfairly impact the inheritance. There is no guarantee that money left in the name of a sibling will ever reach the disabled child. Even if the sibling had the best intentions, things can happen outside of their control that may result in those funds being used for something other than the benefit of the disabled child.
  4. Public benefits are seldom sufficient to meet all the needs of a special needs beneficiary. Frequently the child’s parents supplement the needs of the disabled child. But giving those resources directly to the child will cause more of those benefits to end, resulting in the child’s inherited funds being exhausted prematurely, with no means of supplementing government benefits later.

What is the Best Way to Gift an Inheritance?

With the best interest of your family in mind, Morton Elder Law recommends setting up a Special Needs Trust (also referred to as a Supplemental Needs Trust).

A Special Needs Trust is a trust that guarantees an inheritance and/or assets are available to your special needs child, while also continuing to qualify them for public benefits. There are two types of Special Needs Trusts: First-Party Trust and Third-Party Trust.

Watch for next week’s blog on more specifics surrounding both First-Party and Third-Party Special Needs Trusts, as well as questions regarding Medicare.

Curious to know more about Special Needs Planning? Check out more information on our website.

Your questions, as well as the well-being of your special needs child, is our speciality.

~ Ronald Morton

Medicaid Planning: Caring for a Blind or Disabled Child

John and Mary Bell live in Jackson, Mississippi. They are now in their mid-70’s and they just celebrated their 50th anniversary. The Bells have been blessed with three wonderful children. One is a nurse, one is a school teacher, and their youngest child, Tim, is not able to work. Tim is now in his late 40’s and lives in a group home. He receives Social Security (SSI) of about $650 a month and his parents have always supplemented his income.

Mr. and Mrs. Bell lead a modest life style. Mr. Bell receives Social Security of about $900 per month and Mrs. Bell gets about $650 per month. In addition, he has a pension of $350 per month. They are able to live on this and continue to save about $250 per month. Like most of their generation, the Bells are excellent savers. In fact, they have accumulated a nice little nest egg. Their assets are as follows: Residence $60,000, 1998 Buick $2,500, Certificates of Deposit $50,000, Mr. Bell’s IRA $8,000, Savings bonds $22,000, Money market $20,000, Total Countable Assets $100,000.

Unfortunately, Mr. Bell recently had a stroke and won’t be able to come home. He moved to the nursing home right up the street. Mrs. Bell is satisfied with the care he is getting… but her worst fears are coming to pass. That’s because she can’t care for herself…her Parkinson’s Disease has progressed to the point where she can’t stay at home either… and now that she has joined her husband in the nursing home, who will care for their son, Tim? And most of all, Mrs. Bell is concerned about the money. Mrs. Bell frets over the fact that the nursing home will cost about $10,000 a month for both of them… and that doesn’t count the cost of the medication.

You have good news for the Bells. You explain to them that under the Federal and State laws, Tim is considered to be permanently and totally disabled. Since that is the case, the Bells can give all their assets to Tim… or to a trust for Tim’s benefit… without incurring any transfer penalties. In other words, normally with both spouses in the nursing home, they would pay the cost of the nursing home out of their funds until their assets were down to $6,000. Under this scenario, their $100,000 in liquid assets would last about ten months … and they would end up spending all of Tim’s inheritance.

Fortunately, the news is even better than that. Under the “transfer to a blind or disabled child” section of the Medicaid law, Mr. and Mrs. Bell can transfer all of their assets to their son with a disability and incur no penalty whatsoever. Thus, she and her husband can make a gift of the entire $100,000 and qualify for Medicaid right away! Because Tim is receiving public benefits, they would need to give Tim’s money to him in a special type of trust that would not disqualify him for public benefits. The Bell’s feel better knowing that their son, Tim, will be cared for and they have preserved their life savings. To learn more, click here.

What a Clinton, Flowood, Brandon, Madison and Metro Jackson Area Special Needs Planning Attorney Will Do for You

Special needs planning attorneys in Clinton, Flowood, Brandon, Madison and Metro Jackson Area  have very specialized knowledge that can help families plan for their children’s future.  There are so many things to keep straight when it comes to raising your special needs child, and focusing on what will happen to him or her after your death is not something that is pleasant to contemplate.  Still, it is very important to take the time to meet with a special needs planning attorney in Clinton, Flowood, Brandon, Madison and Metro Jackson Area  in order to give your child the best opportunities.

An Important Tool

Special needs planning is a part of estate planning, and one of the most common things a Clinton, Flowood, Brandon, Madison and Metro Jackson Area  attorney is likely to advise will be a “special needs trust.”  The reason this trust is so important is because it allows you to set aside money for your child’s future without jeopardizing his or her eligibility for government benefits such as Social Security and Medicaid.  Unfortunately, leaving your child even a small inheritance can make it so he or she is no longer eligible for this kind of aid and can severely impact quality of life.

Trusts for Your Child

There are different types of trusts the attorney will go over with you.  Some are funded by the person with special needs, say through an award from a personal injury case or from an inheritance.  Others are specifically funded by a third party such as parents or other family members.  The second kind is the special needs trust, and if it’s the right choice for you, a qualified Mississippi special needs trust attorney will be able to help you understand your options with the trust.

People to Consider

In addition to helping you set up the trust, a special needs attorney will also be able to help you determine the appropriate trustee.  In some cases, this may be a family member or other caregiver.  In other cases, the lawyer or firm may take care of the administration of the trust.  An advocate may also be chosen.  This person will be familiar with both the beneficiary’s needs and the intentions and wishes of the person creating the special needs trust.

Using the Trust

When the trust is set up, the person creating it (called the “grantor”) has a say in how the funds are to be used.  For example, money can be dedicated to the daily needs of the beneficiary.  Dispersal schedules can be created, as well.  In this way, rather than giving someone a single lump sum, you can set up a situation where monthly allotments are made.  The advocate would understand this and work with the trustee to make sure the terms were being followed in the beneficiary’s best interest.  At the same time, the trustee is charged with managing the funds through investments or other means that keep the trust funded.

Of course, this is just an introduction to the possibilities of a trust.  For a much fuller understanding and to get the ball rolling, we invite you to contact our Clinton, Flowood, Brandon, Madison and Metro Jackson Area  special needs attorneys who are knowledgeable about the field, as well as how state laws come into play.  To schedule a free Legacy Planning Session simply call (601) 925-9797 and mention this article.

Why Should You Work with a Special Needs Planning Attorney in Clinton, Brandon, Flowood and Madison-Ridgeland?

Parents of children with special needs in Clinton, Brandon, Flowood and Madison-Ridgeland face a whole extra set of challenges in addition to those of other parents.  On top of physical therapy, occupational therapy, IEPs, and any of a million other details, these parents face additional estate planning needs.  That’s where a special needs planning attorney in Clinton, Brandon, Flowood and Madison-Ridgeland can make a huge difference in these parents’ peace of mind.

The items listed above are just some of the things that parents of special needs kids deal with.  When it comes to planning for the future, these parents need to prepare the way for their children who may not be able to work to support themselves as adults.  They have to be concerned with who would be a suitable guardian for their child, what types of medical decisions should be made, and so much more.  Each physical and mental disability comes with its own set of concerns, and parents want to make sure they are addressed even in the parent’s absence.

Special Needs Planning for the Future

A Clinton, Brandon, Flowood and Madison-Ridgeland special needs planning attorney will be aware of these concerns and will have some answers in place for how to deal with them.  He or she will have worked with many other families, building knowledge and experience which they can apply directly to your planning.

The professional will also understand the ins and outs of the current legal system to help make sure  you are maximizing your impact.  For example, your lawyer can help advise you on how to make sure your child is well cared for without making him or her ineligible for Medicaid benefits.  In some cases, a special needs trust may be the best approach, while there are other options that might work better in different situations.

Extending Your Loving Protection

By creating an estate plan that takes the special needs child into consideration, you and your attorney can also help protect the child from being taken advantage of in the future. It can be used to shield the child from lawsuits and creditors, as well as to designate a trustworthy financial representative who can make money decisions for the child when he or she doesn’t have the best ability to do so for himself or herself.  This lessens the likelihood of an unscrupulous sales person, significant other, or “friend” who would take advantage of your child’s financial situation.

Hire a Clinton, Brandon, Flowood and Madison-Ridgeland Special Needs Lawyer Who Keeps Current

Laws do continue to change, so the best bet is to work with a special needs planning attorney in Clinton, Brandon, Flowood and Madison-Ridgeland who keeps up-to-date on changes in this particular arena.  Unfortunately, you will not always be there to care for your most vulnerable children.  Hiring a skilled lawyer in Clinton, Brandon, Flowood and Madison-Ridgeland can make a real difference in the quality of life that child experiences once you are no longer there to personally make the best choices for him or her.

Clinton Special Needs Lawyer Offers Practical Tips in Setting Up a Supplemental Needs Trust

If you have a family member with special needs, it is important to factor him or her into your estate planning.  In fact, there are “special needs trusts” or “supplemental needs trusts” which can be created specifically for this purpose.  Working with a special needs lawyer in Hinds County is  the best way to make sure that you are setting your loved one up to be cared for when you are no longer able to do so yourself.

Special needs trusts can be set up and funded in numerous ways.  The special needs trust can be either revocable or irrevocable and can spring to life upon your passing or be set up during your life.  Much will depend on how the trust will be funded.  If you are the only one to contribute then a trust that springs to life upon your death may be the best choice.  If other family members, such as grandparent, aunts or uncles will also be contributing to the trust then it makes the most sense to create the trust now.  If you are sure that the parents will be the only contributors, then you might want to consider a revocable trust, as it can be changed throughout your lifetime to reflect the choices you want to make over the course of time.

One of the biggest considerations that needs to be made is who will be the trustee.  This is the person who will administer the trust which has been created to care for your loved one.  Careful thought needs to go into choosing this person, as he or she will have a significant impact on the life of the person cared for by the trust.  The trustee will also have access to funds and will make a lot of important decisions.

Your special needs lawyer in Clinton, MS can help you to define the role of this person through your legal documents, but you still want to choose someone who is trustworthy and has your loved one’s best interests at heart.  He or she should also be very familiar with the specific needs of the person they will be responsible for, which could range from medical concerns to favorite foods and hobbies.  Additionally, you want to choose someone who has the ability to create and execute a reasonable budget.  One option is to name both a family member and a professional as co-trustees.

Of course, determining how much money needs to go into the trust is another major concern.  There are so many factors to take into consideration.  Remember that costs will likely continue to rise over time, so basing totals on today’s costs will likely not be adequate.  This is yet another reason that it makes sense to work with a special needs lawyer in Clinton. He or she will be familiar with many of the most common costs but will also be able to personalize the special needs trust so it is a good fit for your particular situation.

You may find that there are some one-size-fits-all special needs trust planning tools online, but this is an area where that option is really not a good idea.  No one has to tell the parent of a special needs child that every situation is considerably different.  Instead, choose a qualified special needs lawyer in Hinds County for the peace of mind knowing that your child will always be cared for and protected in your absence.

Things to Consider When It Comes to Special Needs Planning in Mississippi

Families who have members with special needs have a variety of concerns that most of the population doesn’t deal with on a regular basis.  Whether you’re traveling to occupational therapy appointments, choosing the most effective medical devices, or contemplating whether to “mainstream” your special needs child, there are so many parts and pieces to keep in mind.  For that very reason, you may not have even considered the need to meet with a special needs planning lawyer in Clinton.

You spend a lot of your time and energy helping your family members with special needs to get the most out of life.  How are you going to keep that up if you become incapacitated or deceased?  Working with an experienced special needs lawyer is a really important step in making that a reality.  The attorney will help you get your affairs in order and will be able to advise you on areas that you might not even realize need attention.  Taking care of these issues now means that things are in place and ready to go should you suddenly become unable to care for your family member.

Clinton Special Needs Consideration #1 – Creating a Guardianship

You likely have very strong feelings about who you would and would not like to be responsible for your family member in your absence.  For example, you may feel that one of your adult children would be an excellent care taker while also being sure that you would not want your parents to be given guardianship.  If you don’t specify this clearly and legally, then the decision would be up to the courts, and your opinion on the matter will have no weight at all.

Clinton Special Needs Consideration #2 – Inheriting Assets

Many special needs attorneys in Mississippi will recommend that you not leave assets to your family member with special needs.  This doesn’t mean you don’t care for the person or want to recognize them in your will.  The point is, if the individual inherits assets, they can cause him or her to suddenly be disqualified from various types of assistance programs.  In fact, Medicaid could even view the acquisition of assets as a reason to go back and try to get payment for benefits paid out in the past.

Clinton Special Needs Consideration #3 – Setting Up a Special Needs Trust

Depending on your situation, your special needs planning attorney in Hinds County may recommend that you set up a specific trust for the family member.  You will also need to determine how the trust will be funded, with life insurance being a common choice.  Again, this action is intended as a way to protect the individual’s ability to qualify for certain types of benefits and public programs.  In addition to possibly providing assets and funding for the family member with special needs, this kind of trust can also name someone you trust as the legal manager of those funds.

It’s hard to overstate the importance of preparing for your loved one’s future, especially when it is apparent that he or she will be dependent upon others for a lifetime.  Working with a special needs planning attorney in Hinds County will allow you to create some peace of mind while ensuring you are in complianc