Special Needs Trust: Protecting Your Child's Future Through Estate Planning
How to Guarantee a Stable Life for Individuals With Special Needs After Their Parents Pass Away
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
"States That Are Parties (To the Convention) Will Recognize That People With Disabilities Have Legal Status Equal to That of Others, in All Aspects of Life"
#. 12 of the Convention on the Rights of Persons With Disabilities
&Nbsp;2006 Convention on the Rights of Persons With Disabilities
How Will Your Child With Special Needs Be Cared for After Your Passing?
Many people avoid confronting questions about death and what they will leave behind. However, for parents of children with special needs who require ongoing support, planning ahead is essential. These parents need detailed guidance to prepare a precise and comprehensive will — one that leaves no room for error — to ensure their children’s stability and continued security.
Wills With Trusts: A Legal Solution for Individuals With Special Needs
One option available to these parents is the creation of a special needs trust. A trust is an effective method for protecting the financial resources of individuals with disabilities following the death of their parents or other legal guardians. As Attorney Igal Mor, owner and partner of Mor & Co. Law Firm in Jerusalem, explains: “There are legitimate concerns regarding the financial management of inherited funds by individuals with special needs. These concerns include the risk that funds will not be properly safeguarded, that third parties could gain access to them, and that the beneficiary may not be able to fully enjoy their inheritance. A special needs trust falls under the broader category of estate planning and addresses precisely these issues.”
"Some concerns have been raised regarding the financial conduct of individuals with special needs who inherit money"
As a civil law firm, Mor & Co. provides legal advice and support across a range of practice areas, including real estate, planning and construction law, family law, inheritance and guardianship, estate planning, family business consulting, intergenerational wealth transfers, and litigation at all levels of the Israeli court system. With extensive legal experience, our professionals have provided legal assistance to thousands of individuals during their most critical times.
According to Attorney Mor and his colleagues, the decision to focus on special needs trusts stems from the imperative to protect a relatively vulnerable population with the utmost sensitivity and professionalism. As Attorney Erez Sapir explains: “It is important to emphasize that there are countless types of disabilities and special needs. For example, if a child struggles with substance abuse, they are also considered to have special needs, and there is concern that the inheritance could be lost. There are therefore situations in which both the heir and the inherited capital must be protected — sometimes even from the heir’s own actions.”
How Does a Special Needs Trust Work?
“Special needs trusts are legal entities established pursuant to agreements or wills,” explains Attorney Mor. “In addition to holding and managing property for a person with special needs, the trust provides for that individual’s various and evolving needs that cannot be met by another entity. A trust involves two essential roles: the beneficiary, for whom the trust was established, and the trustee, who is responsible for managing the trust assets. It is important to emphasize that the assets belong to the trust itself — not to the trustee or the beneficiary.”
Key Questions to Consider Regarding a Special Needs Trust
“The relevant questions are numerous and varied,” notes Attorney Mor. “What is the beneficiary’s functional level? What will their future needs be? What is the expected size of the trust’s assets? Who will manage those assets? How can the trustee’s loyalty to the beneficiary be ensured? And how long is the trust expected to last?” For example, Attorney Mor describes a scenario involving a person with special needs living in a group home operated through a Ministry of Social Affairs contract, whose parents leave behind a residence worth three million shekels and who has two siblings. In such a case, the individual would inherit approximately one million shekels. The critical question becomes whether the state or another entity may access those inherited funds. “The social and economic implications — at both the individual and systemic levels — are profound,” continues Attorney Mor, “and they encompass questions about selling the family home, appointing a guardian or decision-making supporter, and how to protect the inherited property from manipulation by outside parties.”
Attorney Mor notes that parents face many difficult decisions and dilemmas. “Parents often express deep concern and seek solutions that will ensure their children’s lives remain stable and secure, with the same standard of living they are accustomed to. For these parents, the most effective solution is to establish a special needs trust, which is specifically designed to address these concerns.”
What Can Be Done to Protect Children With Special Needs?
“We identify three main scenarios for parents of children with special needs,” explains Attorney Mor. “In the first scenario, the parents do not leave a will, so the statutory rules of inheritance apply, resulting in equal distribution among the heirs. A family member typically serves as guardian for the individual with special needs and reports to the Administrator General regarding the person’s living requirements and how the funds are managed. External supervision is an essential element.”
“In the second scenario, the parents prepare a standard will with equal asset distribution, without making special provisions for the child with special needs. The practical result is often the same as if no will had been made. The third scenario — which we advise against — involves a will with an exclusion clause, meaning the child with special needs is not included in the inheritance. Instead, the siblings make an informal commitment to the parents that they will care for their brother or sister. This approach is problematic because the excluded child’s share is not legally guaranteed, and the arrangement is vulnerable to future manipulation.”
“We reject this third approach,” Attorney Mor emphasizes. “Even if the siblings agree to the commitment, there is no guarantee that their own children or spouses will continue managing their sibling’s affairs in the future. There is also no assurance that the funds will not be diverted for purposes other than the special needs child’s welfare. The most appropriate legal mechanism is therefore a special needs trust, which safeguards — and can even improve — the quality of life of a child with special needs after the parents’ death.” Attorney Mor further explains that a trust can be used in a wide range of situations involving individuals with medical conditions, including mental illness. “Leaving a substantial sum of money to a person who cannot manage their own affairs creates serious risks, as third parties may exploit their vulnerabilities.”
The Importance of a Thorough Family Consultation
“It is essential that we meet with parents in depth to understand the entire family unit — their lifestyles, expectations, and what the coming years may hold,” explains Attorney Mor. “We examine the specific nature of the disability and the projected quality of life based on available medical literature. We listen carefully to the parents’ aspirations in what is an extremely personal conversation. We explain that a special needs trust is one of several legal tools designed to safeguard a child’s capital and quality of life. In some cases, the best approach is to establish the trust while the parents are still alive. Every family’s financial situation is different — some have liquid assets, others have real estate that can be sold or rented. Therefore, each trust must be custom-designed to the family’s unique needs.”
Key Elements of a Special Needs Trust
“A special needs trust ensures that the beneficiary can use the inherited funds to finance their specific needs without outside interference,” explains Attorney Mor. “A trust is composed of four key elements: the settlors (typically the parents), the trustee, the beneficiaries, and sometimes a protector who provides oversight. Common questions include how much money is needed to establish a trust and which assets should be allocated to it.” Attorney Sapir adds: “A wide range of assets can be transferred to a trust — from real estate and stock portfolios to cash, pensions, and insurance policies. Any significant liquid asset can be placed in trust. As for how much the beneficiary needs, the answer depends on the individual’s specific circumstances and projected needs.”
What Can Trust Funds Be Used For?
Attorney Sapir explains: “We have prepared a comprehensive list of products and services that parents may wish to provide for their children through the trust. The trust document includes an open-ended list, with the stipulation that funds may not be used for services or products to which the beneficiary is already entitled through government programs, or for items that would jeopardize the beneficiary’s eligibility for such services.”
How Long Does the Trust Last?
“There are three main scenarios that may bring a trust to an end,” explains Attorney Mor. “First, if the beneficiary passes away, the trust assets are distributed according to the trust’s terms — parents typically direct that the remaining assets be transferred to the beneficiary’s siblings. Second, the trust may become depleted once all assets have been exhausted. Third, the trust may terminate when the beneficiary’s circumstances change — for example, if the trust was established due to substance abuse issues and the beneficiary can demonstrate sustained recovery over a defined period. In that case, as part of a rehabilitative approach, the beneficiary may receive control of the assets and manage them independently.”
How Is a Trustee Selected?
“In most cases, parents select a close family member — typically a first- or second-degree relative — whose judgment they trust and whose loyalty they can rely on,” explains Attorney Mor. “Often, more than one trustee is appointed; in some cases, all siblings are designated as co-trustees. Some families choose to compensate the trustees with a salary to support their normal lifestyle while carrying out this responsibility.” Attorney Mor concludes: “There is a wide variety of solutions available in the field of family wealth planning and asset protection. A special needs trust is one of them, but it is not the only tool. Agreements with asset protection mechanisms, account restrictions, and other complementary solutions can also be employed. A trust complements these other approaches as part of a comprehensive estate plan.”
Published in TheMarker, August 11, 2021
We invite parents, relatives, and friends of individuals with special needs to consult with us regarding a tailored and effective legal solution.
The family law department at Mor & Co. Law Firm has over 15 years of experience in this area. Our attorneys represent and litigate in courts on a daily basis across a range of matters, including family law, guardianship, wills, and complex inheritance cases. With extensive experience in drafting wills with special needs trusts, we are committed to providing our clients with the highest level of expertise.
For legal advice on special needs trusts, contact us at 02-595-3322 or via WhatsApp at 050-441-1343.
Drafting trusts for individuals with special needs is our specialty — creating wills that provide a legal, orderly mechanism to protect children who may require assistance throughout their lives.