Friday, March 9, 2012

Q&A: Special needs trust

I had a few questions after this post about how our special needs trust went.  So I’ll try to answer them before I forget any longer! (Remember, I’m not a legal ace. This is just my experience or opinion expressed.)

imageHow much did you have to pay the attorney to setup the special needs trust?
Our whole process cost us $2300.*  The attorney we used, who we highly recommend if you’re anywhere near where we live, allowed us the option of paying over time if we had needed to do so.  The MetLife guys don’t bill at all. There’s no charge for their services.  If you choose to update life insurance or investments through them, then they get a small percentage from that company.

*We chose to go the more expensive route.  This cost was for both wills, a family trust as well as a special needs trust.  And Braska’s trust is a “self-standing” trust, which requires a bit more legal setup.  It means that the trust exists right now, instead of becoming an entity upon the death of both parents, as is common.  We chose to set it up this way so that friends and family who have wanted to give Braska gifts of money or bonds or who would like to name her as a beneficiary in a will or trust can do so at any time.  This also means that the funds are available to be used as they are given if we would choose.  As long as the funds from her trust are used for HER care, they can be used now or managed and invested to be used later.  Her trust has it’s own tax ID#.  Without this option, a more basic (but still SO necessary!) special needs trust with the accompanying wills and documents can run from $1800 to $2300 depending on several factors.  Some attorneys I’ve heard of charge as much as $3500 for these services.  It’s most important to have attorneys and financial advisors who know the laws and are current in this very specific type of trust! I can’t emphasize that enough!

deathwillstressCan’t we just have a regular will and then let all our loved ones know about what we want to happen after we die?
Um, no. That’s a bad idea. Really bad.  The experts have been more than clear about this in each workshop or meeting we’ve had. Wills and estates go through probate, which can take lots of time and cost money from the estate.  And that allows people who are not YOU to be involved in decisions about your assets and your children!  I am NOT an attorney, so I won’t try to explain all the ins and outs of this situation, but let me strongly encourage you to NOT let this be where you end up.  We were really surprised to learn all the strange nuances of how the courts handle wills.

M and I have come to believe pretty firmly that anyone who has any assets and/or children needs to have a trust.  Not only for special needs.  As we understand more about how the legal process works after death, trusts are not at all just for people with lots of money.  A trust spells out what you want to do with things, and when set up right, ensures that it will actually happen that way.  And as I understand it, the trust flies right by probate completely, so there’s no hold time on when things can begin or continue after the passing of the parent(s).  And a basic family trust is not that expensive at all, totally worth every penny for the end benefit!

imageDo you just split everything evenly between your girls, even though one has special needs?
This is, of course, different for each parent, in what they feel is important for their kids and depending on their unique situation.  For us, we did NOT divide things evenly, we set it up that Kinlee gets 20% and Braska’s trust gets 80%.  Does that seem unfair?  We feel like it’s the most fair thing we can do at this stage. 

Let’s say when we die $1 Million is in the family trust.  The family trust will pour 800K of it’s value into Braska’s special needs trust.  That money will be managed by the trustees we have named, including a corporate co-trustee (a trust company who will assist with taxes, bill paying, and being another eye on the appropriate use of the money).  But unless other people decide to leave money to Braska’s trust, or if others decide to give her monetary gifts at some point in her life, that money will be what she has to live on. For the rest of her life.  Yes, she may earn an income, and we hope she will. But the reality that she will be able to make a living that would fully support her is unlikely.  So if we happen to keel over next year, and Braska still has 50+ years ahead of her, 800K doesn’t really sound like so excessive an amount.  $16,000/year?  Of course, we hope that investments and proper handling would increase that amount, but we don’t want the guardians of the girls to be put in a difficult financial position when they’re doing us the greatest service by caring for our girls after we’re gone.

On the other hand, we fully expect Kinlee to be able to support herself financially. She will have unlimited earning potential, as far as we’re concerned.  So while we would not choose to give her zilch, we also want to make sure that she is not financially obligated to care for her sister, so 200K would be fine with her, I’m sure.  We hope and expect that they will be involved in each other’s lives closely, but we want to make sure that Kinlee is not under financial pressure to provide for her sister.  The experts have said frequently, and we agree, that siblings are not mad about their sibling with special needs receiving a higher percentage of an estate because it frees them to care for their own lives and families without additional financial stress. 

moneytoomuchHow much money do you want to have in your trust in the end?
One of our MetLife guys said this best.  “Is ANY amount really enough?”  He said that for his son, who has special needs that require more constant care and much more medical assistance than Braska does, he will not be able to have “enough,” in truth, but he will work hard to provide absolutely as much as he can.  That’s all we can do.  As much as we can.

In our house, this means that financial independence as a family is very important.  We have it as one of our highest priorities to become more financially secure every year.  Since our family income is definitely in the lower section of the growth chart, it takes a great deal of determination to bring this about.  We have our eyes on the long term. We are working to pay off our house debt, which will make us completely debt free.  We buy cars with cash, and with very little cash available, that means we drive well-used cars.  We don’t have a credit card, and we have a very small, strict grocery budget each pay period.  These are not popular things to do in the society of “buy now, pay later,” but we have decided that it is our responsibility to be sure our girls are not financially dependent on anyone, debtors, government, or even family,  if at all possible.

Choosing to make this a priority has changed our lives a great deal in the last 5 years.  And I don’t always walk around singing the praise of frugality, trust me.  But I do believe in the end goal.  To provide as much as we can for the girls’ financial stability when we’re not there anymore, and to teach them both that our responsibility is to live within our means, no matter what.  And if that means that they don’t get to hit McD’s every time Kinlee wants “nuggets and fries”, if that means that we don’t get to go on trendy trips or vacations, or if that means that we live in a house that’s about half the size of what we’d like to have, so be it.  We’re beyond blessed with family and friends who share generously with us, treating us to dinners out right when we need it, or bringing cute stuff for the girls to wear.  Hang out with my girls for a few hours and tell me if you think they’re deprived… 

Enough for now!  Next we’ll address this one… “Why do I need a trust if I don’t have any money to leave anyway?!?”  If you have more questions, just ask!


  1. Thank you so much for sharing your experience about the trust fund. You answered many questions I had on top of my head.

  2. Thank you for that! It's nice to learn something about this in plain English. I look forward to the next installment, though...

  3. I just emailed this to my husband. Not the trust part - we did that - but the frugality part. I really should have emailed it to myself. Or maybe frame it & hang it in the bathroom.

  4. oh, you are the infinite best. thanks for lighting a fire under me...


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