Corrections for Third Edition of Special Needs Trusts

Some information in the third and earlier editions of Special Needs Trusts: Protect Your Child's Financial Future needs correction.

Page 9: Who can use special needs trusts

Existing Text:

Special needs trusts can benefitthose 65 years of age or older, without a disability, who nevertheless must economically rely on SSI and Medicaid benefits.

Correction:

A special needs trust can be used only for a person with a disability.

Page 10: Using a special needs trust to support a surviving spouse

Existing Text:

Older couples sometimes set up special needs trusts for the survivor, to take effect when one spouse or partner dies.

Correction:

This is true, but it is important to know that you can set up a special needs trust for a spouse only through a will, not a trust.

Page 14: Characteristics of a special needs trust

Existing Text:

All special needs trusts are defined by two basic characteristics:

• The trust document gives the person serving as trustee absolute control over when and how the trust property is spent, as long as it's spent for the sole benefit of the beneficiary, and
• The trust document expressly states that the grantor intends for the property in the trust to be used to pay for goods and services that aren't provided by SSI and Medicaid.

Revision:

All special needs trusts are defined by two basic characteristics:

• The trust document states that the beneficiary cannot direct the use of the funds in the trust for his or her support or maintenance, and
• The trust document expressly states that the beneficiary cannot revoke or terminate the trust.

Page 14: Funding the trust

Existing Text:

[This trust will take effect when you sign it and have it notarized...] Or you can put all of the property you intend to put into the trust while you are alive.

Correction:

It is possible to put additional property into the trust while you are alive. However, see an experienced estate planning attorney or tax professional for help, as putting large amounts of property into the trust during your lifetime could have serious estate and gift tax implications.

Page 51: Making gifts to a special needs trust to reduce the size of your estate

Existing Text:

If you think your estate might owe federal estate tax after your death, making gifts to a special needs trust could be a valuable tax reduction strategy. Most estates don't owe federal estate tax, because the threshold for federal estate taxes ranges from $1 million to $3.5 million, depending on the year of death. But if you're looking to reduce the size of your taxable estate, gift-giving can be useful.

Correction:

Reducing the size of your sizable estate by gifting money or property to a special needs trust is complicated. First, leaving money or property to a special needs trust through your will or living trust (either of which take effect after your death) will not reduce the size of your taxable estate. Estate reducing gifts must be made during your lifetime. Second, it's very complicated to make a gift to a special needs trust that also qualifies for the annual exemption. If you want to do this, see an attorney experienced in taxation and public benefits.

All of these corrections will be incorporated into the fourth edition of Special Needs Trusts, which will be available April 2011.