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A special needs trust is designed to provide a person with a disability the funds to enhance her quality of life while at the same time allowing her to remain eligible for needs-based public benefits.  Government programs like Medicaid and Supplemental Security Income (SSI) provide essentials, such as medical care, food, clothing and shelter. Special needs trusts are intended to supplement, not replace, this kind of basic support. Such trusts pay for anything the trust document provides for, including comforts and luxuries that meager public assistance funds don't cover, hence the term “special needs.”


But what are these special needs? A special needs trust has been likened to a "parent's pocket" -- that is, it pays for the kinds of things that a parent would just reach into his or her pocket to cover.


These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life.


Here are some other examples of expenses that a special needs trust might cover:

  • Medical and dental expenses not covered elsewhere

  • Special equipment like wheelchairs or specially-equipped vans

  • Therapy or rehabilitation services

  • Training and education

  • Help with starting a business

  • Electronic equipment and appliances

  • Travel, including the cost of a companion

  • Recreation and entertainment (summer camp, movies or social events, videos, sports equipment)

  • Insurance

  • Legal or guardianship expenses

  • Burial expenses

However, there are other things a special needs trust should avoid paying for.  Trustees should typically never give an SSI or Medicaid beneficiary cash or a cash equivalent, or pay for food or shelter -- at least without first consulting a special needs planner.  The trustee, in consultation with the planner, might want to use trust funds for food and shelter if the trustee decides doing so is in the trust beneficiary's best interest despite a possible loss or reduction in public assistance.


Once you have taken cash, housing and food off the table, however, a special needs trust can typically pay for most other things a beneficiary might need to supplement his lifestyle. But because these rules are very complicated, it is always best to sit down with your attorney to discuss what you intend to do with your trust before making any payments to anyone.


While the new tax law doubled the federal estate tax exemption, meaning the vast majority of estates will not have to pay any federal estate tax, it doesn't mean you should ignore its impact on your estate plan.

In December 2017, Republicans in Congress and President Trump increased the federal estate tax exemption to $11.18 million for individuals and $22.36 million for couples, indexed for inflation. (For 2019, the figures are $11.4 million and $22.8 million, respectively.) The tax rate for those few estates subject to taxation is 40 percent.


While most estates won't be subject to the federal estate tax, you should review your estate plan to make sure the changes won't have other negative consequences or to see if there is a better way to pass on your assets. One common estate planning technique when the estate tax exemption was smaller was to leave everything that could pass free of the estate tax to the decedent's children and the rest to the spouse. If you still have that provision in your will, your kids could inherit your entire estate while your spouse would be disinherited.


For example, as recently as 2001 the federal estate tax exemption was a mere $675,000. Someone with, say, an $800,000 estate who hasn’t changed their estate plan since then could see the entire estate go to their children and none to their spouse.Another consideration is how the new tax law might affect capital gains taxes. When someone inherits property, such as a house or stocks, the property is usually worth more than it was when the original owner purchased it. If the beneficiary were to sell the property, there could be huge capital gains taxes. Fortunately, when someone inherits property, the property’s tax basis is "stepped up," which means the tax basis would be the current value of the property. If the same property is gifted, there is no "step up" in basis, so the gift recipient would have to pay capital gains taxes. Previously, in order to avoid the estate tax you might have given property to your children or to a trust, even though there would be capital gains consequences. Now, it might be better for your beneficiaries to inherit the property.


Contact me to discuss whether your documents need to be updated for any of the above reasons, or because of changes in your family or financial situation.


Meredith Hilton was featured by Annandale Village in its Board Member Spotlight for February, 2019. Annandale Village, a residential campus award-winning nonprofit organization dedicated solely to providing progressive life assistance to adults with developmental disabilities and acquired brain injuries so they can maximize their abilities and maintain their independence in the least restrictive environment.

How did you get involved with Annandale Village?

Annandale Village - Suwanee, Georgia

I have been involved in the special needs community for some time, both personally and professionally. Almost 10 years ago, I gave birth to my second child, Chase, who happened to have Down syndrome. One of the first things my husband and I wondered when we received his diagnosis was what his life would be like as an adult. Would he be able to live independently and achieve his dreams without having to rely exclusively on us for the rest of his life? Would he be surrounded by people who would help him to stay social and live life to the fullest? Through my work as an attorney who works with families with special needs, I was invited to tour Annandale and was so excited and relieved that there was such a beautiful place where individuals, like my son, could thrive as an adult. In 2015, I proudly joined the Annandale Board of Trustees.


What have you accomplished and what do you hope to accomplish in the future as an Annandale Board Member?  As part of the Board of Trustees and as a member of the Mission Delivery Sub-Committee, my passion has been educating community members about the population served by Annandale. Through my work as a special needs attorney, I enjoy introducing families to Annandale who may be planning for their child’s future. I am also passionate about helping to expand the Off-Campus Independent Living Program. As I think about my son’s future, I recognize the benefits and necessity of having an option where individuals with developmental disabilities and acquired brain injuries can live independently in the community, but still have a support system to ensure they are successful and not isolated.  About:  Meredith gained her undergraduate education from Georgetown University and earned her J.D. from Temple University Beasley School of Law, where she was a Beasley Scholar and received the Award for Transactional Excellence. Meredith started her estate planning firm (www.hiltonattorney.com) in 2006 and has since worked with families across the Metropolitan Atlanta Area and across Georgia to assist with their wills, special needs trusts, and other associated documents. She is a member of the State Bar of Georgia and Leadership Georgia Class of 2013. Meredith lives just outside Atlanta with her husband, Scott, and three children, Trent, Chase and Caroline.