Supplemental Needs Trusts | The Homer Law Firm

Naperville Estate Planning Attorney

For families with a disabled family member, it is absolutely essential to preserve eligibility for government benefits during the lifetime of the individual. In fact, throughout Naperville and the State of Illinois, nearly one out of every ten families have a member with a disability or special needs. Through effective estate planning, you can make sure that your assets go to the people you care about most; however, making sure that those assets preserve critical government benefits requires specialized and highly specific estate drafting and management.

Drafting an effective estate plan that ensures current and future government benefits for a member with a disability is extensively complex. To provide a lifetime safety net for the individual, it is important to have a Naperville estate planning attorney who focuses on supplemental need trusts and who can navigate both Medicaid and SSI planning, if applicable, as well as estate planning.

At the Homer Law Firm P.C. in Naperville, IL, our experienced estate planning attorneys will review your estate plan, will, or trust while providing essential guidance toward the development of a functional, reliable supplemental needs trust. Supplemental needs planning is an ever changing area of law, and with shrinking tax dollars and limited expansion of group homes, it is more important than ever to leave a child or grandchild with lifetime eligibility for needs-based benefits.

Different Types of Supplemental Needs Trust

In most cases, there are two different types of supplemental needs trusts. Understanding how these trusts affect both the benefactor and the beneficiary can provide greater assurance that his or her benefits will remain in place throughout the duration of his or her life. Nonetheless, it is critical to have an estate planning attorney to help you gauge your current estate and how you can best provide for your family member.

Third Party Supplemental Needs Trusts: The most common type of supplemental needs trusts is generally established for a disabled person with the funds of someone other than the beneficiary. If you were to simply give money directly to a disabled loved one, there is a very high chance that he/she will lose some, or all, of the public benefits. Thus, a third party supplemental needs trust gives your loved one extra resources without it affecting their benefits. A supplemental needs trust should be part of your estate plan because inheritance or traditional revocable living trusts can increase the risk of public benefit loss.

Self-settled Supplemental Needs Trusts: A self-settled supplemental needs trust, also known as a first-party supplemental needs trust or an OBRA trust, is standard for disabled individuals who wish to protect their own money while maintaining eligibility for public benefits. Rules for self-settled trusts were formalized in the Omnibus Budget Reconciliation Act of 1993 (OBRA). Establishing a self-settled trust reduces the values of assets reported on a Medicaid or SSI applications. Therefore, if the disabled person receives an inheritance or a settlement for a personal injury lawsuit, for example, those funds won’t have an effect on benefits. While alive, the disabled person can use the money in an OBRA trust for needs not covered by public benefits. However, upon the death of the beneficiary, the remainder of the funds is used to reimburse the government for benefits received during life.

Additionally, there are two subsets of OBRA trusts, including pooled and non-pooled trusts. In short, non-pooled trusts are generally reserved for people over 65 years old, while pooled trusts are reserved for people under 65.

Common Issues with Supplemental Needs Trusts

The importance of an experienced estate planning attorney cannot be understated, and it is not recommended to draft and maintain a supplemental needs trust yourself. For example, some common problems in estate planning drafting include:

Using broad language for inheritance
Failure to select the proper type of supplement needs trust
Failure to select appropriate trustee
Failure to analyze tax issues surrounding the trust

Common problems when managing a supplemental needs trust can include:

Failure to file the correct tax returns
Poorly organized record keeping
Failure to apply for the tax ID for the disabled loved one
Giving cash to the loved one rather than making appropriate distributions

How the Homer Law Firm Can Protect Your Loved Ones

Supplemental needs trusts in Illinois can be a highly complicated manner, and when it comes to the care of your loved one, upholding best practices for the care, management, and distribution of a trust can provide a lifetime safety net. At the Homer Law Firm, we have served clients in Naperville and Chicago as well as throughout DuPage and Will counties for over 30 years, and we can provide extensive management and representation for your trust.

Working alongside you and putting your interests at the forefront of our estate planning strategies, we will also make sure that you aren’t left out of any part of the process. Please contact us at (630) 428-3311 to schedule an appointment.