Estate planning involves more than avoiding probate and estate taxes. For example, parents who have a child with special needs want the child’s inheritance to be protected so that any available government assistance remains in place. The Department of Health and Human Services estimates that 15% of US minor children have special needs. Absent the proper trust, the special needs child’s inherited assets would negatively affect government assistance eligibility.
The key to drafting a special needs trust is to avoid the typical "ascertainable standards" (i. e., health, education, maintenance and support) that provide distribution guidelines for trustees. In contrast to ascertainable standards, the special needs trust terms must expressly prohibit distributions that would disqualify the beneficiary from receiving government support. The trustee must have sole and broad discretion to distribute all or none of the trust income and principal. Thus, selecting a trustee in any trust is critical, but even more so with a special needs trust.