The Benefits of a Special Needs Trust Memorandum of Intent

The need to have a comprehensive estate plan in place is also heightened when you are concerned with protecting and providing for a child with special needs. As part of your estate plan, you may choose to include a special needs trust to ensure that your child is financially secure both now and in the future. A Grand Forks special needs planning attorney at German Law | Wealth explains why you may also wish to create a Memorandum of Intent for your special needs trust. 

The Importance of Special Needs Planning

When the child you are providing for in an estate plan has special needs, however, extra care must be taken to provide financial assistance within your estate plan because making direct gifts can do more harm than good. If your child depends on assistance from government programs such as Supplemental Security Income (SSI) or Medicaid, a direct gift of money or assets could jeopardize your child’s continued eligibility for that assistance. Once your child reaches the age of majority, the law will consider him/her a legal adult, without regard for his/her abilities or functional level. As such, your child’s eligibility for SSI and Medicaid will be determined, in part, by the value of his/her resources. Gifts made to your child, either while you are alive or after you are gone could easily put your child’s resources over the threshold for eligibility. Fortunately, through careful estate planning, you can avoid such a scenario.

What Is a Special Needs Trust?

A Special Needs Trust, also referred to as a Supplemental Needs Trust (SNT), is a specialized type of irrevocable living trust that allows you to set aside assets to be used to “supplement” the assistance provided by programs such as SSI and Medicaid. The assets held in an SNT can be used to pay for comforts and luxuries that cannot be paid for by public assistance funds. A properly drafted Special Needs Trust ensures that assets can be set aside for your child without worrying about the loss of much-needed assistance. Among the many additional benefits of creating an SNT is the fact that other family members may also contribute to the trust, either while they are alive or in their estate plan. 

Why Should I Include a Memorandum of Intent with My Special Needs Trust?

A Memorandum of Intent, also referred to as a “Letter of Intent,” is an optional companion document to a Special Needs Trust. Creating a Memorandum of Intent (MOI) allows you to put down in writing important information that your Trustee should know about your child. Given that your Trustee will be responsible for deciding how and when assets from the SNT are distributed, it only makes sense that your Trustee should know as much as possible about your child’s abilities, routines, likes and dislikes, and any particular interests they may have. Although an MOI is not a legally binding document, it can be a valuable addition to your SNT because it helps your Trustee with the practical aspects of administering the trust. If you have chosen the right Trustee, the information you include in your MOI will be invaluable given the fact that your child may not be capable of communicating that same information to the Trustee. This is your opportunity to give your Trustee as much guidance as possible. You may, for example, wish to include family and medical history, religious beliefs, and favorite activities, as well as some background information on your child’s upbringing. It is also a good idea to include information pertaining to the people and relationships that are important to your child in the MOI because those people can be an invaluable resource to your Trustee. Finally, if you have any specific wishes or hopes for your child’s future, include those in your Memorandum of Intent so your Trustee can help make those wishes come true.

Contact a Grand Forks Special Needs Planning Attorney

Please join us for an upcoming FREE seminar. If you have additional questions or concerns about special needs planning, contact a Grand Forks special needs planning attorney at German Law | Wealth by calling 701-738-0060 to schedule an appointment.