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Special Needs Trusts

July 27, 2017

Protection and peace of mind for your family members with special needs.

By: Peck Ritchey, LLC Attorneys at Law

Having a family member with a disability can be difficult, and just the thought of how you might guarantee they are cared for after you’re gone can be daunting, stressful, and uncertain. Thankfully, there are ways to provide for your loved ones with special needs that protect them and give you peace of mind. Drafting a Third-Party Special Needs Trust is a great way to care for your loved one with special needs that protects the government benefits they are entitled to while at the same time allowing them access to additional funds you’ve set aside for them to pay for expenses not covered by government benefits.

A Third-Party Special Needs Trust is aimed to protect government benefit eligibility for disabled persons who receive assets through inheritance or gifting. It allows trust assets to be reserved for expenses not covered by government benefits and may offer creditor protection for the disabled beneficiary. This type of trust must be established by someone other than the disabled child, or the disabled child’s agent or legal representative and is not funded by assets belonging to the beneficiary.

An important point to remember is that a Third-Party Special Needs Trust, in deference to a basic support trust, allows your disabled loved one’s inheritance to supplement, not supplant, government benefits. The goal of parents or grandparents with special-needs children is not to trade their dollars for the government’s dollars. Rather, they desire that their dollars be in addition to government dollars.

Here in Illinois, the courts have told us that in order for a trust to be qualify as a Third-Party Special Needs Trust the language drafted into the trust document must plainly express the parents’ or grandparents’ purpose in establishing the trust. That the parents’ or grandparents’ intention was to provide a source of funds to be available only to the extent that the government was unwilling or unable to provide such funds. What this essentially means is that the state of Illinois will honor a Third-Party Special Needs Trust, and view the inheritance in the trust as a “reserve fund” meant to subsidize any additional needs your disabled loved one’s require during their life.

Setting up a Third-Party Special Needs Trust can be a daunting process as the language in the trust needs clearly establish that the trust was intended to be a Third-Party Special Needs Trust. Finding an attorney to help guide you through the process is imperative for ensuring the necessary steps taken in drafting the trust are done correctly.  

Kerry R. Peck is the managing partner of the law firm Peck Ritchey, LLC, with offices in Chicago and Northbrook, where he concentrates his practice in Trust and Estate Litigation, Estate Planning, Administration, Guardianship and Fiduciary Litigation, Special Needs and Alzheimer’s Disease Planning. Mr. Peck is past President of the 22,000-lawyer Chicago Bar Association. He was named chair of the State’s Attorney Anita Alvarez’s Elder Abuse Task Force and was retained by the City of Chicago Department of Aging to rewrite the State of Illinois Elder Abuse and Neglect Act. He co-wrote the book Alzheimer’s and the Law, published by the American Bar Association, and frequently teaches attorneys and healthcare professionals across the country.